Fund Watch


An ETF That Focuses on Large-Company Bargains

Anjelica Tan

This fund holds the cheapest stocks in the Russell 1000 index.



If you're looking for a low-cost way to invest in cheap, large-company stocks, consider iShares Russell 1000 Value Index Fund (symbol IWD). The index the exchange-traded fund tracks is itself a subset of nearly 700 of the stocks in the Russell 1000 index, which holds the 1,000 largest publicly traded firms based in the U.S. The ETF "fully replicates" the value side of the Russell 1000, meaning that it holds the stocks in the same weights (or almost the same weights) as the index does, says Rene Casis, an iShares ETF manager.

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If you're looking for a low-cost way to invest in cheap, large-company stocks, consider iShares Russell 1000 Value Index Fund. The index the exchange-traded fund tracks is itself a subset of nearly 700 of the stocks in the Russell 1000 index, which holds the 1,000 largest publicly traded firms based in the U.S. The ETF "fully replicates" the value side of the Russell 1000, meaning that it holds the stocks in the same weights (or almost the same weights) as the index does, says Rene Casis, an iShares ETF manager.

Russell uses three valuation measures—the ratio of price to book value, the two-year earnings-growth forecast and the previous five years' growth in sales per share—to rank all the stocks in the Russell 1000. The lower the price-to-book ratio and the slower the growth, the more likely a company is to fall into the value camp. The 250 cheapest stocks go into the Value index, and the 250 most growth-oriented companies are put in the Russell Growth index (for which a comparable ETF exists). Stocks in the middle range typically go into both the Value and Growth indexes, says Tom Goodwin, a Russell director. Stocks are added to or dropped from the indexes every year in June.

The Value index holds stocks from all major sectors, with the biggest weightings in financials, energy and health care. The ETF's ten biggest holdings, among them Procter & Gamble, Wells Fargo and Berkshire Hathaway, account for 27% of its assets.



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