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Some Multi-Factor ETFs Missed Facebook's Tumble

While social media giant Facebook Inc. FB has recouped some of its late July losses, that swoon and the stock's status as the fourth-largest member of the S&P 500 serve as reminders about some of the potential perils of cap-weighted exchange traded funds.

Multi-factor ETFs eschew weighting by market value to focus on several investment factors, such as growth, low volatility, momentum, quality and value, among others. The multi-factor methodology can help reduce a fund's risk to company-specific events, such as Facebook's recent earnings disappointment.

The JPMorgan Diversified Return U.S. Equity ETF JPUS is an example of a well-known multi-factor ETF that's proving relatively immune to the recent weakness in some big-name social media stocks.

JPUS, which turns three years old next month, “tracks the JP Morgan Diversified Factor US Equity Index, which utilizes a rules-based approach combining risk-weighted portfolio construction with multi-factor security screening based on value, quality and momentum factors,” according to JPMorgan Asset Management.

“The Russell 1000 index is heavily weighted to the technology sector and there's concentration in certain stocks,” said CFRA Research Director of ETF & Mutual Fund Research Todd Rosenbluth in a note out Wednesday. “A factor-driven portfolio using screens such as value, momentum and quality can add upside potential as well as diversification benefits.” Source

The technical picture looks mixed. However, there is a chance for an upside.


Upside potential is over. We can expect some correction and a possible breakout of the rising wedge. 

$JPUS, JPMorgan Diversified Return U.S. Equity ETF / D