Your ETF Could Have a Fatal Flaw. Here's the Answer

Exchange-traded funds, and index mutual funds before them, were designed with a basic objective in mind: mimic the returns of popular stock market averages. The reason why funds designed to track the S&P 500 Index have attracted so much capital is because you can't find a simpler way to get stock market exposure without having to do any stock-picking or research. Buy the ETF and match the market's return.Recently, though, the popularity of index investing has contributed to a phenomenon that ironically has made these index-tracking ETFs less effective in providing actual diversification. Because of the particular methodology that the S&P 500 and many other popular stock benchmarks use in determining how much of any given stock to buy, many of the biggest index ETFs now have surprisingly concentrated stock portfolios. For those whose entire purpose in choosing an ETF was to avoid concentration, that's a surprise.Fortunately, there's an ETF that offers an elegant solution to the problem of concentration. Invesco S&P 500 Equal Weight ETF (NYSEMKT: RSP) avoids the problems that other S&P ETFs have with just one simple tweak to the rules most funds follow. As the Voyager Portfolio continues to look at some of the most popular ETFs in the investing universe, it's natural to turn your attention to the Invesco S&P 500 Equal Weight ETF and the advantages it has over its rivals.Continue readingWeiter zum vollständigen Artikel bei MotleyFool Weiter zum vollständigen Artikel bei MotleyFool