The Street.com 10 Most Diversified ETFs

Richard Widows of The Street.com last week published a list of 10 most diversified ETFs. The criteria used in the screening include the fund has to have at 2% exposure in 12 major industry categories: basic materials, capital goods, communications services, consumer cyclicals, consumer staples, energy, finance, health care, technology, transportation, utilities and miscellaneous. The 10 ETFs that passed the test are:

  • iShares Russell 2000 (IWM)
  • iShares S&P Small Cap 600 (IJR)
  • Vanguard Small Cap ETF (VB)
  • Vanguard Small Cap Value ETF (VBR)
  • iShares Morningstar Mid Core (JKG)
  • iShares Russell Mid Cap Growth (IWP)
  • Vanguard Extended Market ETF(VXF)
  • SPDR 500 (SPY)
  • iShares S&P Global 100 (IOO)
  • streetTracks Dow Jones Stoxx 50 (FEU)

Some key numbers of each ETF are listed in the following table. The original table doesn’t have information on the fund’s expense ratio (ER), which I believe is one of the most important factors when considering which ETF to invest, as well as annual yield. Therefore, I added two extra columns to the table for easy comparison.

Symbol Heaviest
Sector(%)
Lightest
Sector(%)
STD 12-Mo.
Return(%)
Yield(%) ER(%)
IWM Finance
(24.42)
Trans
(2.47)
6.59 18.26 1.05 0.20
IJR Finance
(18.90)
Comm
(2.70)
5.34 15.08 0.75 0.20
VB Finance
(25.13)
Miscs
(2.42)
6.53 15.78 1.20 0.10
VBR Finance
(25.13)
Misc
(2.42)
6.53 19.54 1.89 0.12
JKG Finance
(25.96)
Trans
(2.04)
7.72 14.22 1.23 0.25
IWP Cons. Cyclicals
(18.75)
Misc
(2.44)
5.88 10.51 0.67 0.25
VXF Finance
(26.15)
Misc
(2.00)
6.63 14.38 1.32 0.08
SPY Finance
(23.96)
Trans
(2.03)
6.18 15.81 1.70 0.10
IOO Finance
(16.76)
Comm
(2.53)
4.04 19.90 1.83 0.40
FEU Misc
(18.21)
Energy
(2.19)
6.02 26.67 2.98 0.32

According to the article, each fund’s standard deviation (STD) of each fund measures “how close together the fund’s percentage holdings of the 12 individual sectors are” and

A low standard deviation means that the ETF is more evenly divided among individual sectors than a fund with a higher standard deviation is. Thus, a low standard deviation of sector percentage holdings can be interpreted as an indication of less portfolio concentration and greater diversification.

The table clearly shows that Vanguard is still the one to beat in terms of the cost of the fund as the three Vanguard funds (VB, VBR, and VXF) score the lowest ERs.

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One Response to “The Street.com 10 Most Diversified ETFs”

  1. Lazy Man and Money |  Feb 05, 2007 at 4:30 pm

    I have VB, but I was surprised to not find Vanguard Total Market Index (VTI) in here. You’d think that would be pretty diversified. Perhaps the “total market” just doesn’t cover enough industries or something.