Written by David Fabian, September 12th, 2017
The “fund of funds” style is a portfolio tactic that has been used successfully for many large investment companies. Think about those target-date or target-risk funds in your 401(k). They are essentially a single mutual fund filled with 8-12 underlying funds to create a highly diversified investment strategy using varying asset classes.
It was initially assumed that this same dynamic would be readily embraced in the exchange-traded fund format as well. However, after several failed attempts, it’s becoming apparent that ETF investors want certain attributes within a “fund of fund” strategy that they can’t find elsewhere. The following three examples highlight the largest of this breed and how they have developed over the last decade.
Read the complete article at NASDAQ.com
Written by David Fabian, September 14th, 2016
There is no doubt that 2016 has been a good year for ETF investors directing their capital towards income-generating asset classes. The combination of a rising stock market and falling interest rates have helped push prices higher across virtually every segment of the economy. This of course has depressed current yields. But on a total return basis, you are looking fairly good as long as you didn’t do something foolish like sell in February and remain in cash. Read more
Written by David Fabian, February 09th, 2016
Exchange-traded funds that generate their buy and sell signals based on momentum have become an extremely successful corner of the market. These funds typically use systemic triggers to overweight their portfolio towards the strongest corners of the market relative to other opportunities. This leads to purchasing sectors that are outperforming their peers and relinquishing areas of the market that have fallen out of favor.
This type of rebalancing may seem like it falls into the “active management” category, but fund sponsors are largely able to get around that moniker by keeping things very transparent and methodical. They don’t plan changes based on research or intuition by a team of experts. All of the transactions are done at specific intervals based on precise factors that are spelled out in the prospectus. That is why they are often labeled as “smart beta” or an “enhanced index”, which is used to differentiate this type of fund from a traditional passive benchmark or active portfolio.
Written by David Fabian, July 14th, 2015
Equal weight exchange-traded funds are one of the oldest and most easily understood of all the smart beta strategies. Simply put, these indexes allocate an equal portion of the underlying assets to each of the designated holdings. While that may not seem like an important distinction, it can have a tremendous impact on the overall portfolio construction, performance, fees, and risk of a particular group of stocks.
Read the complete article at NASDAQ.com
Written by Michael Fabian, August 09th, 2013
One of the largest wakeup-calls many income investors received during this most recent backup in Treasury rates is just how volatile traditional dividend stalwarts can get.
Utilities, REITs, consumer staples, and preferred stocks all exhibited higher than expected volatility in what was largely perceived as a concern only for bond investors. Low financing costs are of vital importance to many of these industries to maintain their margins, which helps insure the continuation of high-dividend payments to shareholders that would otherwise jump ship.
So as Treasury yields spiked; future cost of capital was suddenly called into question, thereby resulting in a more protracted decline.
Income portfolios I have reviewed this year for prospective clients have all presented eerily similar asset allocations: A high concentration of intermediate-term bonds in concert with traditional dividend-paying equities, alongside a sprinkle of real estate just for good measure. Read more