FDRR versus EQRR
There is often more than one choice of ETFs with similar-sounding names. For example, there are a multitude of ETF’s that trace the S&P 500. There are also similar ETF’s focused on unique strategies. FDRR an EQRR are two such funds.
For this “Friday Fund” I am doing a comparison of a Fidelity fund with a “comparable” ProShares Fund. However, there are more differences than similarities when you compare the two. You would think a “rising rates” fund would focus on sectors that have the most potential for growth if the Fed rate is increasing. This is one of those circumstances where a clever approach might sound like a good way to gain an advantage. We should examine the facts. Seeking Alpha’s tool makes it easy to compare stocks and ETF’s, and a quick look makes me more inclined to invest in FDRR than EQRR. However, I won’t be putting any of my investment dollars in FDRR at this time. The purpose of this short read is education for those who invest in ETF investments. Read on to learn how to do the comparison and evaluation of ETF’s side-by-side.
NOTE: There are other “rising rates” ETFs. I did not take the time to look at all of them. However, I found “ProShares Trust – ProShares Equities for Rising Rates ETF” without much effort. It has the ticker symbol of EQRR.
Fidelity Dividend Index for Rising Rates (FDRR)
Fidelity claims their fund “seeks to provide investment returns that correspond, before fees and expenses, generally to the performance of the Fidelity Dividend Index for Rising Rates. Normally investing at least 80% of assets in securities included in the Fidelity Dividend Index for Rising Rates and in depository receipts representing securities included in the index. The Fidelity Dividend Index for Rising Rates is designed to reflect the performance of stocks of large and mid-capitalization dividend-paying companies that are expected to continue to pay and grow their dividends and have a positive correlation of returns to increasing 10-year U.S. Treasury yields.”
If this sounds a bit nebulous, then you are reading it correctly. It is almost akin to saying, “we set the measurement and then we will measure our performance against our index.” Always look at the top ten investments and the top sectors. If you look at the top ten holdings in FDRR, you won’t have a great “Ah-Ha!” moment.
The Contrasting Holdings
FDRR favors technology, health care and financials. EQRR, in contrast, is much more heavily weighted to the financials. I think EQRR’s holdings are more aligned with a “rising rates” strategy. Unfortunately, rates have not been rising. Furthermore, to FDRR’s advantage, technology has been the investor’s darling.
Of course, “past performance is no promise of future results” but a poor performer might not be a good investment for the future. You certainly don’t want to entrust a large sum of your assets to an underperforming fund manager. Seeking Alpha makes it easy to compare two or more funds side-by-side. Here is a view of FDRR and EQRR using that tool.
FDRR or EQRR – Which to Choose?
The short answer: certainly not EQRR. The expense ratio, performance, diversification approach and fund size are all deficient. FDR is better, but there are better ETFs for the long-term investor. In my next post I plan to talk about a video that one of my readers shared with me. It is another good review of twelve different ETFs. I will share the link and provide some of my own analysis and commentary.
We don’t own FDRR or EQRR and currently don’t have plans to buy either. Cindie and I own more than 1,500 shares of ETF VYM as a more well-rounded investment with dividend growth.