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Making its debut on 01/14/2020, smart beta exchange traded fund iShares MSCI USA Quality GARP ETF (GARP) provides investors broad exposure to the Style Box - All Cap Growth category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is sponsored by Blackrock. It has amassed assets over $349.28 million, making it one of the average sized ETFs in the Style Box - All Cap Growth. Before fees and expenses, GARP seeks to match the performance of the MSCI USA QUALITY GARP SELECT INDEX .
The MSCI USA Quality GARP Select Index composes of U.S. large and mid-capitalization growth stocks exhibiting favourable value and quality characteristics.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for this ETF are 0.15%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.37%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
GARP's heaviest allocation is in the Information Technology sector, which is about 47.90% of the portfolio. Its Consumer Discretionary and Financials round out the top three.
Looking at individual holdings, Broadcom Inc (AVGO) accounts for about 6.02% of total assets, followed by Meta Platforms Inc Class A (META) and Apple Inc (AAPL).