A Sector Investing Perspective
PowerShares ETFs are issued by PowerShares Exchange Traded Fund Trust. PowerShares Capital Management, LLC is the advisor and sponsor of the PowerShares ETF family of exchange traded funds. PowerShares Capital Management, LLC is a unit of UK-based investment management company, INVESCO PLC.
Breadth of Sector ETFs
PowerShares Exchange Traded Fund Trust offers 45 sector and industry-group ETFs.
PowerShares sector and industry group ETFs commonly use the American Stock Exchange’s Intellidex Index (i.e., PowerShares Dynamic series) and FTSE RAFI Sector Index (i.e., PowerShares FTSE RAFI series) as underlying indexes. Selected industry group ETFs cover unique niches and use other indexes.
The Intellidex Index is an equal dollar-weighted index constructed from stocks having capital appreciation potential. The Intellidex Index is dynamic in that its component stocks are chosen every quarter. PowerShares ETFs are rebalanced and reallocated each quarter to match the composition of Intellidex index.
The FTSE RAFI sector index is constructed using equities in a particular sector by equally weighting scores on each of the four fundamental metrics, book value, cash flow, dividends, and sales. The FTSE RAFI sector indices are reconstituted annually.
The maximum expense ratio for PowerShares ETFs is 0.60%.
PowerShares ETFs shares may be purchased in ’round lots’ of 100 shares or smaller with the minimum number being one share.
PowerShares offers a group of ETFs that span several sectors and industry groups. PowerShares ETFs in the Dynamic series are ‘dynamically’ indexed with both growth and valuation-related parameters being used to select securities. The Dynamic series of PowerShares ETFs may whet the appetite of GARP investors.
By using fundamental weighting factors, PowerShares ETFs in the FTSE RAFI series seek to avoid over-weighting over-valued stocks and under-weighting under-valued stocks. Security selection in this series of PowerShares ETFs is more in sync with criteria used by value investors.
Some PowerShares ETFs target unique niches like alternative energy, private equity, and water resources. Investors seeking industry group-specific ETFs will find the PowerShares offerings worthy of consideration.
The expense ratio of PowerShares ETFs usually tends to be a tad higher than competing ETFs. Some PowerShares ETFs may not be highly liquid and may have relatively large bid-ask spreads.
AlphaProfit Newsletter and PowerShares ETF Recommendations
AlphaProfit Sector Investors’ Newsletter is the premier resource for sector investors. The Newsletter offers PowerShares exchange traded fund recommendations. The Newsletter and its model portfolios have frequently been ranked #1 by Hulbert Financial Digest.
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