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Why sector ETFs are lagging their benchmarks

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RIC diversification rules mean that sector ETFs are often underweight some of their largest constituents compared to S&P 500 sectors. Consumer Discretionary, Technology, and Communication Services ETFs have lagged their benchmarks most over the last 12 months. RIC diversification is a double-edged sword that can just as easily boost returns as suppress them.

Ned Davis Research | Equities | U.S. Sector & Industry Focus | Weekly

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