Back to top

Image: Bigstock

Is Franklin U.S. Equity Index ETF (USPX) a Strong ETF Right Now?

Read MoreHide Full Article

The Franklin U.S. Equity Index ETF (USPX - Free Report) was launched on 06/01/2016, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - All Cap Blend category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes 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.

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

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

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

Managed by Franklin Templeton Investments, USPX has amassed assets over $1.21 billion, making it one of the larger ETFs in the Style Box - All Cap Blend. Before fees and expenses, this particular fund seeks to match the performance of the MORNINGSTAR US TARGET MARKET EXPOSURE ID.

The Morningstar US Target Market Exposure Index targets large and mid-capitalization U.S. stocks representing the top 85% of the U.S. equity market by float-adjusted market capitalization.

Cost & Other Expenses

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.03%, making it one of the least expensive products in the space.

USPX's 12-month trailing dividend yield is 1.25%.

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.

USPX's heaviest allocation is in the Information Technology sector, which is about 30.10% of the portfolio. Its Financials and Healthcare round out the top three.

Taking into account individual holdings, Apple Inc (AAPL - Free Report) accounts for about 6.65% of the fund's total assets, followed by Microsoft Corp (MSFT - Free Report) and Nvidia Corp (NVDA - Free Report) .

USPX's top 10 holdings account for about 34.92% of its total assets under management.

Performance and Risk

The ETF has lost about -1.49% so far this year and is up roughly 14.07% in the last one year (as of 03/05/2025). In the past 52-week period, it has traded between $43.09 and $53.79.

USPX has a beta of 0.89 and standard deviation of 15.82% for the trailing three-year period. With about 558 holdings, it effectively diversifies company-specific risk.

Alternatives

Franklin U.S. Equity Index ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core S&P Total U.S. Stock Market ETF (ITOT - Free Report) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI - Free Report) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $63.54 billion in assets, Vanguard Total Stock Market ETF has $454.58 billion. ITOT has an expense ratio of 0.03% and VTI charges 0.03%.

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 - All Cap Blend.

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.

Published in