Is Franklin U.S. Equity Index ETF (USPX) a Strong ETF Right Now?

Designed to provide broad exposure to the Style Box - All Cap Blend category of the market, the Franklin U.S. Equity Index ETF (USPX) is a smart beta exchange traded fund launched on 06/01/2016.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

Managed by Franklin Templeton Investments, USPX has amassed assets over $1.05 billion, making it one of the average sized ETFs in the Style Box - All Cap Blend. Before fees and expenses, USPX seeks to match the performance of the MORNINGSTAR US TARGET MARKET EXPOSURE ID.

The Morningstar US Target Market Exposure Index targets large and mid-capitalization U.S. stocks representing the top 85% of the U.S. equity market by float-adjusted market capitalization.

Cost & Other Expenses

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Annual operating expenses for USPX are 0.03%, which makes it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.29%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector - about 30.80% of the portfolio. Financials and Consumer Discretionary round out the top three.

Taking into account individual holdings, Apple Inc (AAPL) accounts for about 6.67% of the fund's total assets, followed by Microsoft Corp (MSFT) and Nvidia Corp (NVDA).

Its top 10 holdings account for approximately 33.75% of USPX's total assets under management.

Performance and Risk

The ETF has lost about -3% so far this year and is up roughly 13.70% in the last one year (as of 05/05/2025). In the past 52-week period, it has traded between $43.36 and $53.79.

USPX has a beta of 0.90 and standard deviation of 17.92% for the trailing three-year period. With about 562 holdings, it effectively diversifies company-specific risk.

Alternatives

Franklin U.S. Equity Index ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core S&P Total U.S. Stock Market ETF (ITOT) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $65.52 billion in assets, Vanguard Total Stock Market ETF has $449.21 billion. ITOT has an expense ratio of 0.03% and VTI charges 0.03%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Blend.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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This article originally published on Zacks Investment Research (zacks.com).

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