Market factor

Is the FlexShares Morningstar US Market Factor Tilt ETF (TILT) a solid ETF right now?

MSince its inception on 9/16/2011, the Smart Beta FlexShares Morningstar US Market Factor Tilt ETF (TILT) listed index fund has offered investors broad exposure to the Style Box – All Cap Blend category of the market.

What are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market-cap-weighted indexes, a strategy created to mirror the particular market or market segment.

Market-cap-weighted indices are ideal for investors who believe in market efficiency. They offer an inexpensive, convenient and transparent way to replicate market returns.

On the other hand, some investors who believe it is possible to beat the market through superior stock selection choose to invest in another class of funds that follow non-cap-weighted strategies – commonly known as smart beta. .

Based on specific fundamental characteristics, or a combination thereof, these indices attempt to select stocks that have the best chance of risk-return performance.

Methodologies such as equal weighting, one of the simplest options, fundamental weighting, and volatility/momentum-based weighting are all choices available to investors in this space, but not all of them can deliver superior returns. .

Fund Sponsor and Index

The fund is managed by Flexshares and has been able to raise over $1.62 billion, making it one of the largest ETFs in the Style Box – All Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the Morningstar US Market Factor Tilt Index.

The Morningstar US Market Factor Tilt Index measures the performance of US equity markets with increased exposure to small cap and value stocks.

Cost and other expenses

Investors should also pay attention to an ETF’s expense ratio. Lower cost products will perform better than higher cost ones, assuming all other metrics remain the same.

On par with most peer products in the space, this ETF has an annual operating expense of 0.25%.

Its 12-month dividend yield is 1.24%.

Sector exposure and main holdings

Although ETFs provide diversified exposure that minimizes single-stock risk, investors should also examine the actual holdings within the fund. Fortunately, most ETFs are very transparent products that disclose their holdings on a daily basis.

TILT’s heaviest allocation is in the information technology sector, which represents around 22.30% of the portfolio. His finances and health round out the top three.

Looking at individual holdings, Microsoft Corp Common Stock Usd 0.00000625 (MSFT) accounts for approximately 3.89% of total assets, followed by Apple Inc Common Stock Usd 0.00001 (AAPL) and Amazon.com Inc Common Stock USD 0.01 (AMZN).

The top 10 holdings represent approximately 15.35% of total assets under management.

Performance and risks

The ETF has lost around -5.92% so far this year and is up around 9.89% over the past year (as of 03/22/2022). Over the past 52 weeks, it has traded between $154.98 and $184.34.

TILT has a beta of 1.10 and a standard deviation of 24.03% for the three-year period, making the fund a medium-risk pick in the space. With approximately 2,260 holdings, it effectively diversifies company-specific risks.

Alternatives

FlexShares Morningstar US Market Factor Tilt ETF is a great option for investors looking to outperform the Style Box – All Cap Blend segment of the market. There are other ETFs in the space that investors might also consider.

The iShares Core S&P Total US Stock Market ETF (ITOT) tracks the S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI) tracks the CRSP US Total Market Index. IShares Core S&P Total US Stock Market ETF has $44.04 billion in assets, Vanguard Total Stock Market ETF has $283.74 billion. ITOT has an expense ratio of 0.03% and VTI charges 0.03%.

Investors looking for cheaper, lower-risk options should consider traditional market-cap-weighted ETFs that aim to match the returns of the Style Box – All Cap Blend.

Conclusion

To learn more about this product and other ETFs, find products that fit your investment goals, and read articles about the latest developments in the ETF investment universe, please visit Zacks ETF Center.

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FlexShares Morningstar US Market Factor Tilt ETF (TILT): ETF Research Reports

Amazon.com, Inc. (AMZN): Free Stock Analysis Report

Apple Inc. (AAPL): Free Inventory Analysis Report

Microsoft Corporation (MSFT): Free Stock Analysis Report

Vanguard Total Stock Market ETF (VTI): ETF Research Reports

iShares Core S&P Total US Stock Market ETF (ITOT): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.