The ETF ecosystem grows with each passing day, as more funds look to embrace the wrapper’s strengths. Perhaps one of the strongest ways to make use of the wrapper, however, is to provide a streamlined way to package high conviction ideas. The (RANK) provides a solid example of a high conviction ETF.
- While rising rates and costs put up some limits, markets may broaden into quality and value as AI dominates.
- The high conviction ETF RANK offers flexibility, investing outside of sector limits in other index funds.
- For example, it has LLY weighted much more than the company is in the S&P 500.
RANK charges a 60 basis point fee to track the TipRanks US Momentum Analysts Index. That index looks to package a list of U.S. firms based on analyst buy recommendations and price momentum.
Specifically, the high conviction ETF emphasizes firms backed by both analysts and positive market trends. Initially, the index ranks companies by conviction before screening for momentum, initially weighting for market cap. The strategy launched just this past summer, in late June.
That type of approach could have a particularly intriguing use case as the market broadens. Rather than just stick to the biggest indices, a fund like RANK instead looks to deep analysis that is willing to buck the trend. For example, the fund’s third-largest holding, (LLY), is weighted much more heavily in RANK than in the broader S&P 500.
What’s more, it also offers the freedom to invest across categories. Its index looks for the strongest ideas, outside of just tech and the AI revolution. That reduces its contribution to overall concentration risk that comes with the more traditional big index ETFs. What level of market broadening can investors expect in the months to come?
See more: Who Are You Calling Passive? Many Index ETFs Dynamically Rebalanced in September
While rising costs and rates impact some segments more than others, value opportunities remain. Areas like financials and some health care companies offer value and quality that can bolster a high conviction ETF like RANK. Looking ahead, funds like these represent some of the best use cases from an ever-growing ETF ecosystem.
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VettaFi LLC (“VettaFi”) is the index provider for RANK for which it receives an index licensing fee. However, RANK is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of RANK.