Not All ETF’s are Created Equal

Below are two ETF’s related to the oil market sector – one iscapitalization weighted (RYE) and the other is Equal weighted (IYE).

You can see from three stocks that are common to BOTH ETF’s thattheir percentages in the respective ETF’s  are very different and youwill also note that the performance of the equal weighted ETF – IYE wasSIGNIFICANTLY better (almost 5 times better) since the beginning of2009.

 Rydex S&P Energy ETF (RYE)

  • Exxon Mobil Weight = 2.60%
  • Chevron Weight = 2.60%
  • Conoco Phillips Weight = 2.70%
  • Total = 7.9%

 iShares Dow Jones Energy ETF (IYE)

  • Exxon Mobil Weight = 21.19%
  • Chevron Weight = 11.87%
  • Conoco Phillips Weight = 5.47%
  • Total = 38.53%

 The lesson learned here is that you have to do some research intoeach ETF to see how they are weighting their holdings and if you feelthat their weighting is appropriate. You can get this information fromeach ETF’s website. In regard to the solar market segment, at this timeI feel that it would be best to try and find an ETF what gaverelatively EQUAL weight to all solar stocks since the industry is sonew and is highly volatile.


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