I started out the day with the intention of recommending a large-cap stock for Investopedia readers. However, before I could settle on one particular option, an exchange-traded fund (ETF) jumped out at me that solves all of your equity needs in one, reasonably priced package. Read on and I'll explain why most investors shouldn't hesitate owning this fund including yours truly.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

Just One

The ETF I speak of is brought to you by the good people at Russell Investments, who created the Russell Equity ETF (ARCA:ONEF) in May 2010. Constructed as a "fund of funds," it uses an asset allocation strategy to invest in other ETFs. The current list of holdings includes a total of 10 ETF's from iShares, Russell and Vanguard. The biggest holding by far is the iShares Russell 1000 Index Fund (ARCA:IWB), which represents over 47% of the entire portfolio. Investing in some of America's largest companies, the average market cap is roughly $99 billion, firmly in large cap territory. If you already own ETF's, it's very possible that the IWB is one of them. So, the question becomes why an investor would own the 10 additional funds; especially when the ONEF has underperformed the S&P 500 by around 397 basis points annually since its inception two years ago. My simple answer is that most people have better things to do with their time than buying and selling ETF's. This one fund does it all when it comes to equities. No muss, no fuss.

What About the Fees?

In my previous life before becoming a writer I marketed wrap investments in Toronto. Inevitably, the biggest question potential investors had involved the fees. Am I paying for fees on top of fees? Is this extra layer of advice really worth it? I could go on. The point being that open-ended "fund of funds" often possessed this Byzantine schedule of fees, and an investor quite rightly needed to do his or her homework. The beauty of this ETF is that Russell provides an actively managed asset allocation for just 0.51% annually. A $10,000 investment would incur fees over 10 years of just $640 dollars. On its overview page, as well as in the prospectus, it points out that the 11 ETFs that make up its holdings add approximately 0.16% in fees on top of the 0.35% management fee. When you consider that you'll pay an annual expense ratio of 0.70% for the completely passive First Trust NASDAQ Global Auto Index (Nasdaq:CARZ), I consider the ONEF a much better deal.

Active Vs. Passive ETF Investing


If you're feeling the need for income, I suppose you could add a bond fund like the Vanguard Total Bond Market ETF (ARCA:BND), which has a SEC yield of 1.96% and is dirt cheap at a 0.10% expense ratio. However, the ONEF provides almost as much yield with a much better capital appreciation potential. Personally, in today's interest rate environment, this one fund is all you need. Nonetheless, for those who thirst for yield, take a look at Russell's High Dividend Yield ETF (ARCA:HDIV), which has an expense ratio of 0.33% and a SEC yield of 4.04%. If you're going to chase yield, this is a better way to go. Years ago I can remember seeing George Russell on a TV show answering a question about the appropriateness of equities in a senior's portfolio. Russell basically said even a 90-year-old grandmother should own some because of the inflation protection they provide. Bonds can serve a purpose but don't be fooled into thinking they're any safer long term.

SEE: Advanced Bond Concepts

The Bottom Line

The Russell Equity ETF is as tiny as they come with less than $6 million in net assets and a little more than 1,200 shares traded daily. Many will avoid it--Don't!

At the time of writing, Will Ashworth did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: ProShares UltraPro Nasdaq Biotech

    Obtain information about an ETF offerings that provides leveraged exposure to the biotechnology industry, the ProShares UltraPro Nasdaq Biotech Fund.
  2. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Europe Financials

    Learn about the iShares MSCI Europe Financials fund, which invests in numerous European financial industries, such as banks, insurance and real estate.
  3. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Insurance

    Learn about the SPDR S&P Insurance exchange-traded fund, which follows the S&P Insurance Select Industry Index by investing in equities of U.S. insurers.
  4. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Emerging Markets Small Cap

    Learn about the SPDR S&P Emerging Markets Small Cap exchange-traded fund, which invests in small-cap firms traded at the emerging equity markets.
  5. Mutual Funds & ETFs

    ETF Analysis: ETFS Physical Platinum

    Learn about the physical platinum ETF. Platinum embarked on a bull market from 2001 to 2011, climbing to record prices along with other precious metals.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Turkey

    Learn about the iShares MSCI Turkey exchange-traded fund, which invests in a wide variety of companies' equities traded on Turkish exchanges.
  7. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  8. Mutual Funds & ETFs

    ETF Analysis: Guggenheim Enhanced Short Dur

    Find out about the Guggenheim Enhanced Short Duration ETF, and learn detailed information about this fund that focuses on fixed-income securities.
  9. Mutual Funds & ETFs

    ETF Analysis: iShares US Oil&Gas Explor&Prodtn

    Learn about the iShares U.S. Oil & Gas Exploration & Production ETF, which provides an efficient way to invest in the exploration and production sector.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares Morningstar Small-Cap Value

    Find out about the Shares Morningstar Small-Cap Value ETF, and learn detailed information about this exchange-traded fund that focuses on small-cap equities.
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  4. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  5. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  6. Lion economies

    A nickname given to Africa's growing economies.
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  4. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!