A relative minnow in a sea of sharks in the exchange-traded fund world, WisdomTree Investments (WETF 1.53%) carved out its own niches with nearly 100 ETF offerings. Here are five of its very best funds, worthy of consideration for investors looking for something different in their portfolios.
|
Exchange-Traded Fund |
Ticker |
Annual Expense Ratio |
|---|---|---|
|
Europe Hedged Equity Fund |
(HEDJ 0.72%) |
0.58% |
|
Japan Hedged Equity Fund |
(DXJ 0.12%) |
0.48% |
|
LargeCap Dividend Fund |
(DLN 0.06%) |
0.28% |
|
MidCap Dividend Fund |
(DON 0.77%) |
0.38% |
|
SmallCap Dividend Fund |
(DES 1.22%) |
0.38% |
Data source: WisdomTree.
Image source: Getty Images.
WisdomTree hedged currency ETFs
WisdomTree made its name by taking in billions of dollars of assets with its hedged currency funds. The two most important, and most interesting, are its Europe Hedged Equity Fund and its Japan Hedged Equity Fund.
Returns from foreign investments come from two sources: the performance of the foreign market, and the performance of the foreign markets' currency. But many investors would prefer not to worry about currency fluctuations. WisdomTree made that possible -- easy, even. By buying these two ETFs, you can broadly own Japanese and European stocks and get a return that is not affected by currency fluctuations between the U.S. dollar, euro, or yen.
The chart below shows just how devastating currency fluctuations can be to performance. Since the 2008 financial crisis, the U.S. dollar has generally strengthened against the euro. Americans who bought European stocks would have a significant portion of their would-be gains erased by the U.S. dollar's strength during the period.
Image source: WisdomTree.
Note that while these funds will necessarily outperform unhedged European and Japanese stocks when the dollar strengthens, they will also underperform when the U.S. dollar weakens.
WisdomTree dividend ETFs
In a hunt for yield, exchange-traded fund sponsors have frequently gone off the deep end, creating new ETFs that simply buy the highest-yielding stocks on the market. Though it's seemingly the best strategy at first glance, companies that offer the highest yields are often a poor choice -- likely just months away from a dividend cut, or are funding dividends with low-quality, run-off business models or debt financing.
WisdomTree employs a unique twist on its dividend ETFs, ranking stocks not by their yield, but by the dollar amount of dividends it expects companies to pay in the following year. The result is a portfolio that focuses neither on the lowest-yielding stocks (companies must pay a dividend to be considered for inclusion) nor the highest-yielding stocks (which could be due for a dividend cut).
Its large-cap dividend ETF is a perfect example of what you get with WisdomTree's dividend focused ETFs. Top holdings include ExxonMobil, AT&T, and Microsoft -- all of which offer dividend yields that are as beefy as they are sustainable and reasonable.
Its small- and mid-cap dividend ETFs offer exposure to more value-oriented companies of intermediate size, which have historically been market-thumping performers over history. (Small-cap value stocks remain the best-performing over long periods of time.)
All three funds are relatively inexpensive, carrying fees that tally to just 0.38% annually, which places them in a firmly competitive spot among other dividend-focused exchange-traded funds. That investors can also drill down by market capitalization makes them a more interesting choice for investors who would like to generate additional yield from their small- and mid-cap allocations.
