Investment Philosophy
Common sense says "buy low, and sell high."
By design, market cap-weighted ETFs do the opposite.
WisdomTree uses a rules-based methodology to select and weight companies in our ETFs by a measure of fundamental value — instead of stock price alone. After researching all of the fundamental indicators of value, WisdomTree believes the most-effective metrics are cash dividends, or core earnings.
Each offers a compelling index approach for several reasons:
Why dividends?
- From 1926 through 2004, reinvestment of dividends accounted for 96% of the stock
market’s total return after inflation*
- Weighting by dividends can raise a portfolio’s dividend yield. Research shows that
portfolios comprised of the highest dividend-yielding stocks within the S&P 500** Index
have historically outperformed the S&P 500 Index as a whole.
- Cash dividends provide an objective measure of a company’s value and profitability
— one than cannot be manipulated
- Potential bear market protection — as stock prices fall, investors can buy more shares
with reinvested dividends
Why earnings?
- Only profitable companies are eligible for inclusion. This helps screen for money-losing
and speculative companies, both of which can make an index more volatile.
- Weighting by earnings can lower a portfolio’s overall P/E Ratio1. Research shows that portfolios comprised of low P/E stocks within the S&P 500 Index have historically outperformed the S&P 500 Index as a whole*
- WisdomTree Earnings ETFs utilize S&P "core earnings2" to help eliminate one-time earnings events and other distortions
With fundamentally weighted ETFs, we believe we’ve developed a wiser approach to ETFs that offers the potential for more profitable long-term investing — with less risk — than the capitalization-weighted options comprising 95% of today’s ETF market.
* The Future for Investors, Jeremy Siegel 2006.
- Price/Earnings Ratio (P/E Ratio) is a valuation ratio of a company’s current share price compared to its
per-share earnings.
- Core earnings is a standardized calculation developed by Standard & Poors designed to include expenses, incomes and activities that reflect the actual profitability of an enterprise’s ongoing operations.
** S&P 500 is maintained by the S&P Index Committee, a team of Standard & Poor’s economists and index analysts, who meet on a regular basis. The goal of the Index Committee is to ensure that the S&P 500 remains a leading indicator of U.S. equities, reflecting the risk and return characteristics of the broader large cap universe on an on–going basis. (Source: www.standardandpoors.com)
Investors should carefully consider the investment objectives, risks, charges and expenses of the Funds before investing. To obtain a prospectus containing this and other important information, please call 1-866-909-WISE (9473) or click here to view or download a prospectus online. Read the prospectus carefully before you invest. There are risks involved with investing including the possible loss of principal. Past performance does not guarantee future results.
There are risks associated with investing including possible loss of principal. In addition to the normal risks of investing, foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. Investments in real estate involve additional special risks, such as credit risk, interest rate fluctuations and the effect of varied economic conditions. Funds focusing on a single country, sector and/or smaller companies generally experience greater price volatility.
WisdomTree Funds are distributed by ALPS Distributors Inc.
For investment professional and institutional use only
