Designed to provide broad exposure to the Large Cap Blend segment of the US equity market, the Principal U.S. MegaCap ETF (USMC) is a passively managed exchange traded fund launched on 10/12/2017.

The fund is sponsored by Principal Funds. It has amassed assets over $1.87 billion, making it one of the larger ETFs attempting to match the Large Cap Blend segment of the US equity market.

Why Large Cap Blend

Companies that fall in the large cap category tend to have a market capitalization above $10 billion. Overall, they are usually a stable option, with less risk and more sure-fire cash flows than mid and small cap companies.

Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.12%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.53%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector--about 31.40% of the portfolio. Healthcare and Telecom round out the top three.

Looking at individual holdings, Apple Inc Common Stock Usd.00001 (AAPL) accounts for about 5.91% of total assets, followed by Pfizer Inc Common Stock Usd.05 (PFE) and Pepsico Inc Common Stock Usd.017 (PEP).

The top 10 holdings account for about 32.82% of total assets under management.

Performance and Risk

USMC seeks to match the performance of the Nasdaq US Mega Cap Select Leaders Index before fees and expenses. The Nasdaq U.S. Mega Cap Select Leaders Index uses a quantitative model designed to identify equity securities of companies with the largest market capitalizations in the Nasdaq US 500 Large Cap Index, with higher weights given to securities that are less volatile.

The ETF has lost about -0.18% so far this year and is up about 27.84% in the last one year (as of 01/05/2022). In the past 52-week period, it has traded between $34.92 and $44.69.

The ETF has a beta of 0.90 and standard deviation of 20.73% for the trailing three-year period. With about 47 holdings, it has more concentrated exposure than peers.

Alternatives

Principal U.S. MegaCap ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, USMC is a reasonable option for those seeking exposure to the Style Box - Large Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Core S&P 500 ETF (IVV) and the SPDR S&P 500 ETF (SPY) track a similar index. While iShares Core S&P 500 ETF has $339.13 billion in assets, SPDR S&P 500 ETF has $457.93 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

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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Principal U.S. MegaCap ETF (USMC): ETF Research Reports
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
Pfizer Inc. (PFE) : Free Stock Analysis Report
 
PepsiCo, Inc. (PEP) : Free Stock Analysis Report
 
SPDR S&P 500 ETF (SPY): ETF Research Reports
 
iShares Core S&P 500 ETF (IVV): ETF Research Reports
 
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