Why This Retail ETF Doubled Its Assets In A Week

January 12, 2017


The good-news-one-day, bad-news-another cycle is great for traders looking for swings, and may be what attracts them to retail ETFs such as XRT.

The fund holds all retail stocks across the U.S. market and equal-weights them, giving small and midsize companies a much greater weighting than they would otherwise have. In XRT's portfolio, a retail giant such as Amazon has the same weighting as Shutterfly, a tiny company by comparison. Additionally, struggling apparel stocks are the largest subindustry in XRT's portfolio, accounting for a quarter of the fund.

Those two factors make XRT a volatile fund, ripe for trading. However, for investors less concerned about swings and more interested in long-term performance, XRT isn't necessarily the best option.

The VanEck Vectors Retail ETF (RTH), the second-largest retail fund, with almost $100 million in assets, has handily outperformed XRT in the past five years. In the same time that XRT rose by 78%, RTH climbed 119%.

5-Year Returns For XRT, RTH

RTH's outperformance stems from its index, which tracks a market-cap-weighted basket of the 25 largest U.S.-listed retailers, a top-heavy approach that contrasts sharply with that of XRT. In fact, Amazon alone makes up 15.8% of RTH's portfolio, while the top 10 holdings combined account for 63% of the fund's portfolio.

RTH's methodology has served it well in the past few years, as top holdings such as Amazon, Home Depot and Lowe's rocketed higher. There's no guarantee RTH will continue to outperform, but it's a unique option worth considering for retail investors.


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