PowerShares

Introduction

PowerShares ETFs are issued by PowerShares Exchange Traded Fund Trust. The PowerShares sector makes use of the American Stock Exchange's Intellidex Index (i.e., PowerShares Dynamic series) and FTSE RAFI Sector Index (i.e., PowerShares FTSE RAFI series). The sophisticated approach aims to take ETF investing to a new level.

ETFs are mainly based on Intellidexes. If you still want an explanation about what Intellidex Index actually is – it is an equal dollar-weighted index that rises from the stocks that have the potential of capital appreciation and outperforming the market. The component stocks of Intellidex Index are specified for every quarter. The PowerShares ETFs are also adjusted each quarter to match the Intellidex index. It paves the way of a wide array of investment possibilities by taking care of the fundamental growth, stock valuation taking in the risk factors as well.

The maximum expense ratio that is specified for PowerShares ETFs is 0.60% and they can be purchased at a minimum number of one share. One can also buy them in round lots of 100 shares.

The Benefits of PowerShares

PowerShares are really dynamic indexes that can be relied upon because of their valuation-related parameters which the investors can use to select the securities. It is indexed with growth as well. PowerShares ETFs in the FTSE RAFI series aim at balancing the over-valued stocks and under-valued stocks. Thus, they are more in sync and highly valued by the value investors and span various sectors and industry groups.

A few of the PowerShares ETFs also target some specific and diversely unique sectors like energy, private equity, and water resources. The investors who are particularly interested in finding industry group-specific ETFs consider the virtues of PowerShares offerings seriously. However, the expense ratio of PowerShares ETFs may be higher than the competing ETFs in the market. Sometimes they are not highly liquid meaning that the bid-ask spreads may be relatively larger than the others.

Some Disadvantages Related to PowerShares

These PowerShares ETFs are volatile at times and the investors need to take care of their investments at the time of investing itself. Of course there is the sophisticated strategy of the new investment processes updated with PowerShares ETFs. Sometimes, there is the problem of setting up a margin account which is a risk that many investors do not want to take. But there is always the chance of playing it safe by using the funds as a hedge if they are planning for a long run in index or sector funds. In this way, even though there are possibilities of a market downturn, there are possibilities of a favorable rise as well if the market conditions get better.

Conclusion

PowerShares can prove to be beneficial with the benefits of a mutual fund investment but at the same time the burdens of high fees of other actively managed funds are absent with the PowerShares investments.

Thus, the PowerShares are really a boon to the investors who understand the conditions of the market and the upcoming changes and these new strategies are really going to help them a lot.