ETFs
Is the SoFi Select 500 ETF (SFY) a strong ETF right now?
The SoFi Select 500 ETF (SFY) debuted on 04/11/2019 and is a smart beta exchange traded fund that provides broad exposure to the Style Box – Large Cap Growth category of the market.
What are Smart Beta ETFs?
Market-cap-weighted indices 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 capitalization-weighted indices offer a low-cost, convenient and transparent way to replicate market returns and are a good option for investors who believe in market efficiency.
Some investors, however, believe that it is possible to beat the market through excellent stock selection; this group probably invests in another class of funds known as smart beta, which follow strategies that are not weighted by market capitalization.
In trying to select stocks that have better risk-return performance prospects, non-market-capitalization-weighted indices are based on certain fundamental characteristics, or a combination of them.
This field offers many different investment choices, such as the simplest methodologies of equal weighting, fundamental weighting, and volatility/momentum weighting; however, not all of these strategies can yield the best results.
Fund and Index Sponsor
The fund is managed by Sofi and has managed to raise over $845.37 million, making it one of the mid-cap ETFs in the Style Box – Large Cap Growth. SFY seeks to match the performance of the SOLACTIVE SOFI US 500 GROWTH INDEX before fees and expenses.
The Solactive SoFi US 500 Growth Index follows a rules-based methodology that tracks the performance of 500 of the largest U.S.-listed companies, weighted by a proprietary combination of market capitalization and fundamental factors.
Costs and other expenses
For ETF investors, expense ratios are an important factor to consider when evaluating a fund’s performance; over the long term, cheaper funds actually have the ability to outperform their more expensive cousins if all else remains the same.
The operating costs on an annual basis are 0% for this ETF, making it the cheapest product in the sector.
Its 12-month dividend yield stands at 1.10%.
Sector exposure and main holdings
ETFs offer diversified exposure and thus minimize the risk associated with any one security, but it is always important to examine a fund’s assets in detail before investing. Most ETFs are very transparent products and many disclose their assets on a daily basis.
SFY’s largest allocation is to the information technology sector, which represents approximately 27.50% of the portfolio. The consumer discretionary and financials sectors round out the top three.
The story continues
Looking at individual holdings, Nvidia Corp (NVDA) accounts for about 15.53% of total assets, followed by Amazon.com Inc (AMZN) and Microsoft Corp (MSFT).
The top 10 stocks represent approximately 43.58% of total assets under management.
Performance and risk
SoFi Select 500 ETF is up about 21.10% year-to-date and is up about 32.87% over the past 12 months (as of 7/10/2024). SFY has traded between $14.59 and $20.41 over the past 52 weeks.
SFY has a beta of 1.03 and a standard deviation of 18.50% over the past three years. With around 502 stocks, it effectively diversifies company-specific risk.
Alternatives
The SoFi Select 500 ETF is a reasonable option for investors looking to outperform the Style Box – Large Cap Growth segment of the market. However, there are other ETFs in this sector that investors may want to consider.
The Vanguard Growth ETF (VUG) tracks the CRSP US Large Cap Growth Index and the Invesco QQQ (QQQ) tracks the NASDAQ-100 Index. The Vanguard Growth ETF has $138.87 billion in assets, the Invesco QQQ has $301.19 billion. The VUG has an expense ratio of 0.04% and the QQQ charges 0.20%.
Investors looking for cheaper, less risky options should consider traditional market-cap-weighted ETFs that aim to match the returns of the Style Box – Large Cap Growth.
Conclusion
To learn more about this and other ETFs, find products that match your investment goals, and read articles on the latest developments in the ETF investment universe, visit Zacks ETF Center.
Want to know the latest recommendations from Zacks Investment Research? Download the 7 Best Stocks for the Next 30 Days today. Click to get this free report
SoFi Select 500 ETF (SFY): ETF Research Reports
Amazon.com, Inc. (AMZN): Free Stock Analysis Report
Microsoft Corporation (MSFT): Free Stock Analysis Report
NVIDIA Corporation (NVDA): Free Stock Analysis Report
Invesco QQQ (QQQ): ETF Research Reports
Vanguard Growth ETF (VUG): ETF Research Reports