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Is SoFi Select 500 ETF (SFY) a Strong ETF Right Now?

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The SoFi Select 500 ETF (SFY - Free Report) made its debut 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?

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.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

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.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is managed by Sofi, and has been able to amass over $807.99 million, which makes it one of the average sized ETFs in the Style Box - Large Cap Growth. This particular fund, before fees and expenses, seeks to match the performance of the SOLACTIVE SOFI US 500 GROWTH INDEX .

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 based on a proprietary mix of their market capitalization and fundamental factors.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.05%, making it one of the least expensive products in the space.

SFY's 12-month trailing dividend yield is 1.17%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

For SFY, it has heaviest allocation in the Information Technology sector --about 34.90% of the portfolio --while Financials and Consumer Discretionary round out the top three.

Taking into account individual holdings, Nvidia Corp (NVDA - Free Report) accounts for about 14.04% of the fund's total assets, followed by Amazon.com Inc (AMZN - Free Report) and Microsoft Corp (MSFT - Free Report) .

The top 10 holdings account for about 42.03% of total assets under management.

Performance and Risk

The ETF return is roughly 14.01% so far this year and it's up approximately 22.54% in the last one year (as of 09/09/2024). In the past 52-week period, it has traded between $14.59 and $20.62.

The ETF has a beta of 1.03 and standard deviation of 19.15% for the trailing three-year period. With about 503 holdings, it effectively diversifies company-specific risk.

Alternatives

SoFi Select 500 ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.

Vanguard Growth ETF (VUG - Free Report) tracks CRSP U.S. Large Cap Growth Index and the Invesco QQQ (QQQ - Free Report) tracks NASDAQ-100 Index. Vanguard Growth ETF has $129.56 billion in assets, Invesco QQQ has $270.32 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Growth.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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