Quant Strategy Sector ETFs List
(click on symbol for data and articles)
First Trust AlphaDEX Sector ETFs
First Trust Consumer Discretionary AlphaDEX Fund (NYSEARCA:FXD)
First Trust Consumer Staples AlphaDEX Fund (NYSEARCA:FXG)
First Trust Energy AlphaDEX Fund (NYSEARCA:FXN)
First Trust Financials AlphaDEX Fund (NYSEARCA:FXO)
First Trust Health Care AlphaDEX Fund (NYSEARCA:FXH)
First Trust Industrials/Producer Durables AlphaDEX Fund (NYSEARCA:FXR)
First Trust Materials AlphaDEX Fund (NYSEARCA:FXZ)
First Trust Technology AlphaDEX Fund (NYSEARCA:FXL)
First Trust Utilities AlphaDEX Fund (NYSEARCA:FXU)
PowerShares Dynamic Sector ETFs
PowerShares Dynamic Banking Portfolio (NYSEARCA:PJB)
PowerShares Dynamic Basic Materials Sector Portfolio (NYSEARCA:PYZ)
PowerShares Dynamic Biotechnology & Genome Portfolio (NYSEARCA:PBE)
PowerShares Dynamic Building & Construction Portfolio (NYSEARCA:PKB)
PowerShares Dynamic Consumer Discretionary Sector Portfolio (NYSEARCA:PEZ)
PowerShares Dynamic Consumer Staples Sector Portfolio (NYSEARCA:PSL)
PowerShares Dynamic Energy Exploration & Production Portfolio (NYSEARCA:PXE)
PowerShares Dynamic Energy Sector Portfolio (NYSEARCA:PXI)
PowerShares Dynamic Financials Sector Portfolio (NYSEARCA:PFI)
PowerShares Dynamic Food & Beverage Portfolio (NYSEARCA:PBJ)
PowerShares Dynamic Hardware & Consumer Electronics Portfolio (PHW)
PowerShares Dynamic Healthcare Sector Portfolio (NYSEARCA:PTH)
PowerShares Dynamic Healthcare Services Portfolio (PTJ)
PowerShares Dynamic Industrials Sector Portfolio (NYSEARCA:PRN)
PowerShares Dynamic Insurance Portfolio (NYSEARCA:PIC)
PowerShares Dynamic Leisure & Entertainment Portfolio (NYSEARCA:PEJ)
PowerShares Dynamic Media Portfolio (NYSEARCA:PBS)
PowerShares Dynamic Networking Portfolio (NYSEARCA:PXQ)
PowerShares Dynamic Oil & Gas Services Portfolio (NYSEARCA:PXJ)
PowerShares Dynamic Pharmaceuticals Portfolio (NYSEARCA:PJP)
PowerShares Dynamic Retail Portfolio (NYSEARCA:PMR)
PowerShares Dynamic Semiconductors Portfolio (NYSEARCA:PSI)
PowerShares Dynamic Software Portfolio (NYSEARCA:PSJ)
PowerShares Dynamic Technology Sector Portfolio (NYSEARCA:PTF)
PowerShares Dynamic Telecommunications & Wireless Portfolio (PTE)
PowerShares Dynamic Utilities Portfolio (NYSEARCA:PUI)
Sector Rotation ETFs
Claymore/Zacks Sector Rotation ETF (NYSE:XRO)
What Are They?
- Quant strategy sector ETFs provide exposure to US sectors via a basket of stocks determined by rules-based quantitative analysis, such as "overweight stocks with low P/E ratios" or "overweight stocks that have beaten earnings estimates for three quarters running".
- The PowerShares ETFs select stocks based on undisclosed valuation criteria. The underlying stock baskets are recalibrated every quarter.
- These ETFs aren't entirely market cap weighted or equal weighted. 60% of the basket is devoted to a group of large cap stocks and 40% to mid and small cap stocks. But within the market cap-defined groups, the stocks are equal weighted, with each large cap stock given a 2.5% weighting and each mid and small cap stock a 1.36% weighting.
Why & How To Use Them
- Use these ETFs instead of regular index sector ETFs if you believe that quantitative, rules-based stock selection will outperform a market cap weighted or equal cap weighted index.
- There are three ways to use sector ETFs: (1) for short term trading, (2) to overweight one or a couple of sectors in a long term portfolio by adding a single sector ETF to a portfolio of broader ETFs, or (3) as the basic building blocks of a long term portfolio. Quant strategy sector ETFs are arguably less suitable for short term trading than longer term investment strategies because the underlying basket of stocks isn't knowable.
- The argument for using sector ETFs as the basic building blocks of a portfolio is that doing so makes your portfolio more granular, providing more rebalancing opportunities.
What to Look Out For
- Compared to broader index ETFs, specialty ETFs such as quant strategy sector ETFs, tend to have higher expense ratios and wider buy-sell spreads (which makes them more costly to purchase and sell).
- The quarterly recalibration of the stock baskets underlying these ETFs leads to higher stock turnover and therefore potentially higher trading costs and lower tax efficiency.
- Articles on ETFs mentioned here: Claymore's New Rotation ETFs: A One-Stop Approach To Country Investing and Income Growth (Matt Hougan), First Trust Launches AlphaDEX Family of Quant ETFs (Matt Hougan).
- For more on PowerShares, see Mick Weinstein's PowerShares: Growing Assets But With High Expense Ratios.
- Types of sector ETFs: Global Sector ETFs, Foreign Sector ETFs, Primary US Sector ETFs, Equal Weight Sector ETFs, Quant Strategy Sector ETFs, Fundamental Sector ETFs and Leveraged Sector ETFs.
This page is part of The Seeking Alpha ETF Selector which sorts ETFs by type, highlights how to use them and what to look out for, and provides links to articles that discuss key issues for investors.