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Launched on 10/04/2022, the VanEck Morningstar SMID Moat ETF (SMOT) is a smart beta exchange traded fund offering broad exposure to the Style Box - All Cap Blend category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
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 Van Eck. It has amassed assets over $440.44 million, making it one of the average sized ETFs in the Style Box - All Cap Blend. SMOT, before fees and expenses, seeks to match the performance of the MORNINGSTAR US SML-MID CAP MOAT FOCUS ID.
The Morningstar US Small-Mid Cap Moat Focus Index tracks the overall performance of small and mid-cap companies with sustainable competitive advantages and attractive valuations.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.49% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.12%.
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.
For SMOT, it has heaviest allocation in the Consumer Discretionary sector --about 22.40% of the portfolio --while Healthcare and Industrials round out the top three.
Taking into account individual holdings, Tapestry Inc (TPR) accounts for about 1.73% of the fund's total assets, followed by Lpl Financial Holdings Inc (LPLA) and Carnival Corp (CCL).