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David Jagielski

David Jagielski is a financial analyst and writer who has written on several financial sites including Motley Fool.

High net worth clients rely on Registered Investment Advisor (RIA) to provide the best investment options for a given risk profile. Independent RIAs are not affiliated with a specific broker dealer organization and their advice tends to be unbiased. The problem, however, is that clients may be too passive in taking the advice and don’t ask their RIAs to explore other, lower-cost alternatives that could do just as well or better than a managed fund. For example, ETFs generally offer low manager management expense ratios and offer appealing options to actively managed mutual funds.

That’s where Raltin comes in to enable RIAs to offer clients highly correlated alternative ETFs to mutual funds. Raltin  runs 2.5 billion correlation calculations across 40,000+ mutual funds and stocks to show ETF alternatives to popular mutual funds with many ETFs to choose from.

Here are a few examples:

Mutual FundAlternative ETF 1 (Correlation Score)Alternative ETF 2 (Correlation Score)Alternative ETF3 (Correlation Score)
FWWFX - Fidelity Worldwide FundSCHG - Schwab US Large-Cap Growth ETF (.84)ACWI - iShares MSCI ACWI (.84)VT - Vanguard Total World Stock ETF (.84)
JBALX - Janus Henderson Balanced Fund - I SharesIVV - iShares Core S&P 500 (.86)SPY - SPDR S&P 500 ETF (.86)IWB - iShares Russell 1000 (.86)
TRVLX - T. Rowe Price Value Fund Inc.IWD - iShares Russell 1000 Value (.87)PRF - PowerShares FTSE RAFI US 1000 ETF (.86)VTV - Vanguard Value ETF (.86)

Fidelity Worldwide Fund (NASDAQ:FWWFX) is a well-diversified portfolio of stocks of securities issued anywhere in the world. It focuses on growth and providing investors with good returns over the long term. However, over the past 12 months the fund has declined by more than 7% and in two years it has grown by just 11%. Schwab US Large-Cap Growth ETF, which according to Raltin is the most similar ETF, has risen 5% in the past year while in two years it has grown by nearly 30%. All this with a much lower expense ratio of just 0.04% compared to Fidelity Worldwide’s ratio of 0.94%. The other ETFs have also outperformed Fidelity during both one and two-year intervals.

Janus Henderson Balance I Fund (NASDAQ:JBALX) gives investors a bit of a balance between stocks and bonds with the former making up a little more than 55% of the fund’s total assets. The fund is a little heavily tilted toward technology and financial services, with some of the biggest names being in its portfolio. In the past year it has declined 1.5% and over two years it has risen just 7%. The SPDR S&P 500 ETF has a miniscule 0.09% expense ratio and at 2.2% has outperformed the fund. The iShares Core S&P 500 ETF (ARCX:IVV) has come in slightly lower at 2.1% and has an even lower 0.04% expense ratio.

The T.Rowe Price Value Fund (NASDAQ:TRVLX) is a solid option for value investors as it focuses on low-multiple stocks that also pay modest dividends as well. Heavily focused on defensive stocks, it’s a good risk-averse fund that has performed poorly in the past year, with its value dropping by 10%. All of the comparable ETFs listed by Raltin have outperformed the fund with returns of close 0%. While not amazing, it’s also not a big loss either.

As you can see from the above examples, having alternative ETFs available can help investors and RIAs make smarter decisions that can still be a good fit for an investor’s profile while minimizing costs and maximizing overall returns.


Learn more about the Raltin’s correlation methodology and how Raltin serves financial advisors.

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