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A Must-Read Structural Analysis of Smart Beta Fund IWF

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Nov. 27 2015, Updated 1:01 p.m. ET

Growth approach

The iShares Russell 1000 Growth ETF (IWF) is a smart beta fund that seeks to track the investment results of the Russell 1000 Growth Index. The index provider is primarily composed of large-cap and mid-cap US equities from the Russell 1000 universe that exhibit growth characteristics. A growth stock focuses on increasing its value in the market rather than providing yield or income dividend to its investors. Below is a line chart that compares the market performance of IWF with other smart beta ETFs such as the iShares Russell 1000 Value ETF (IWD) and the PowerShares FTSE RAFI US 1000 Portfolio (PRF).

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Market performance comparison

It’s apparent from the chart that IWF is the best performer among the three ETFs. IWF has consistently maintained an uptrend while the others got affected by the weak economic activity in the market. Similar to IWF, IWD portfolio is tilted toward value stocks instead of growth stocks. Value stocks generally have a high potential for capital appreciation. PRF, on the other hand, is composed of stocks selected on the basis of four fundamental measures that are book value, cash flow, sales, and dividends. All three funds manage portfolios of more than 600 holdings.

High risk, high reward

The top holdings of IWF are Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Verizon (VZ), and Coca-Cola (KO). Very few growth stocks are able to survive in the market as they constantly try to outperform each other. Growth stocks are one of the riskiest types of asset in the market but provide an equally excellent opportunity for gaining high returns.

In the next part of the series, we’ll study the moving average trend and analyst estimates of IWF.

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