- DEF follows a quantitative-based Index that selects 100 S&P 500 stocks based on historical volatility and the probability of achieving required sales growth. Its expense ratio is 0.55%.
- The ETF has no exposure to the Energy sector, which is likely to outperform should inflation keep running hot. The importance given to low-beta stocks may be a flaw.
- DEF outperformed the S&P 500 by about 7% from November 2007 to February 2009, but it has failed to offer much protection lately. The selection process may be outdated.
- Unusually, there isn't a tradeoff between valuation and growth. An S&P 100 Equal Weight Index ETF has both a lower price-earnings ratio and stronger revenue and EPS growth rates.
- Defensive investing is attractive at the moment, but this ETF isn't the way to do it. Wait for a substantial price decrease first, or simply avoid DEF altogether.
For further details see:
DEF: Definitely Don't Buy Into This Defensive ETF