What weighs more…a pound of feathers or a pound of gold?
You may remember this schoolyard trick riddle…whose answer, of course, is that they weigh the same.
Or do they?
Actually, gold is traditionally measured using a different weight system – the troy ounce, which weighs 31.1 grams as opposed to 28.35 grams for the regular, or avoirdupois ounce. You would think that would make a pound of gold heavier – but it’s not, since there are only 12 ounces in the Troy pound. So that ultimately means a pound of feathers weighs more.
Pretty cool, huh?
I’ve been thinking about this old riddle lately as I watch money move in and out of different market sectors…creating, if you will, a “heavier pound” in one place or another. This phenomenon is called “sector rotation.”
Sometimes – as with the heavier feather example – the bulk of the money lands in places you wouldn’t expect.
In the past, I’ve described ETFs as “baskets of stuff” that trade like individual stocks. So looking at the top stock holdings that make up the “baskets” will help us understand why these ETFs trade like they do.