THE WisdomTree BLOG
ETFs are built on a backbone of transparency, while mutual funds are opaque in nature. And although mutual funds trade at NAV, it doesn’t mean the execution cost is free. Bryan Moore explains.
When your starting point is a 1.4% dividend yield, as is the case with the S&P 500 Growth Index, the group of stocks that makes up the basket had better have long-term dividend growth that performs like Seabiscuit, the super horse. No tripping out of the gate or getting bumped in the stretch. Everything must go perfectly.
At the risk of making a 34-year-old pop culture reference, growth stock fundamentals recall the question first posed by Wendy’s: “Where’s the beef?” As was the case in 1984, when war was declared on McDonald’s and Burger King, there appears to be a lot of “bun” in the U.S. growth stock story, but not a lot of “meat” in their valuations.
A measure of the relationship between active share and fees is the hurdle rate, the amount that active selections have to outperform to cover the MER. If you think about it, this is what really matters in picking a fund or ETF. How do you think about performance?
The FAANGs could keep growing until they take over the universe. However, if they don’t, there is plenty of precedent for seemingly unstoppable stocks to fall from grace. WisdomTree’s TSX-listed U.S. equity ETFs are by and large avoiding the FAANGs. FAANG skeptics, seek “SEPTICS.”