Motley Fool Launches Second ETF This Year

Motley Fool has launched a new ETF, Motley Fool Small-Cap Growth ETF MFMS skewed toward the growth factor of companies. This turns out to be Motley’s second ETF launch for the year with Motley Fool 100 Exchange Traded Fund TMFC  launched in February, and has been able to amass nearly $140 million worth of assets (as on Nov 2) (see: all the Small-cap ETFs here).

Inside MFMS

The fund is actively managed and targets the small-cap segment of the market. Securities are selected based on factors like corporate culture, strong free cash flows, overall economics of the business, leverage levels, competitive advantages and its ability to sustain the same over the long term.

Per the prospectus, the fund happens to be non-diversified and could invest a significant portion of net assets in securities of a single issuer or a particular sector at any point of time. Sector-wise, Healthcare (38%), Industrials (18%) and Technology (14%) occupy double-digit weights.

The issue appears to be hot as it has been able to amass $21.8 million since its inception on Oct 30. Expense ratio charged is 0.85% (read: 4 Sector ETFs & Stocks for Bountiful Gains in November).

How Does it Fit Into a Portfolio?

There is heightened tension in the markets of late. Rising rate concerns, Iranian sanctions, political turbulence in Italy, International Monetary Fund (IMF) cutting growth forecasts for this and the next year are causing panic globally thereby hurting investor sentiment . Trade war concerns have hit the global trade scene adversely, though tension seem to be have temporarily halted with ongoing trade talks between President Trump and Li.

One possible way to escape this situation is to invest in the small-cap segment of the United States. U.S. economy topped estimates and expanded at an annual rate of 3.5% in the third quarter, being on track to achieve Trump’s 3% GDP goal. U.S. consumer spending, which constitutes nearly 70% of country’s GDP, increased $53 billion or 0.4% in September, marking the seventh consecutive month of gain by this margin, per Commerce Department.  Job report for October was quite strong with the unemployment level at 3.7%, marking a 49-year high.

So it is prudent to invest in the small-cap market, which is less dependent on global logistics and supply chains and to a large extent insulated from global upheavals as it derives most of its revenues from within the country (read: IMF Cuts Global Growth Forecast: ETFs in Focus).

Competition

The fund will face serious competition from popular ETFs like iShares Russell 2000 Growth ETF IWO, iShares S&P SmallCap 600 Growth ETF IJT and iShares Morningstar Small-Cap Growth ETF JKK. IWO and IJT have amassed $44.7 billion and $43 billion worth of net assets, respectively, while JKK has AUM of $199.4 million. IWO (0.19%), IJT (0.07) and JKK (0.30%) all beat MFMS on expense ratio charged.

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ISHARS-RS 2K GR (IWO): ETF Research Reports
 
ISHARS-SP SC GR (IJT): ETF Research Reports
 
ISHARS-MO SC GR (JKK): ETF Research Reports
 
MOTFL-100 IDX (TMFC): ETF Research Reports
 
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