In this month’s video, I look at the technical trends developing in growth versus value stocks. Chart review includes analysis of large-cap, small cap, international, Treasury bonds, and high yield bond ETF prices. Observations of risk and reward are noted throughout, with an emphasis on trend following and sensible portfolio management. Recorded on May 31, 2017.
Sometimes you stumble across a sector of the market that is just in the right place at the right time. That may very well be the sentiment driving the remarkable price action in aerospace and defense stocks in the current geopolitical environment. These companies are the driving forces behind military and commercial aircraft, defense equipment, and other services designed to support the armed forces. Read more
There is an allure to stock picking that many investors find irresistible. They want to believe that uncovering the next Apple, Facebook, or Amazon is just a click away. That they will have the fortitude to hold through the desperate times, in order to reap the rewards of exponentially increasing their wealth.
Individual stocks also carry unique and personable stories that make them easier to latch onto. Products that consumers love. Executives with a firm grasp on their business model. Fundamentals that belie the true value of the company’s hidden potential. Some, or all, of these factors add to the attractiveness of publicly-traded stocks as they align with your philosophical beliefs about the markets and economy.
The world of exchange-traded funds is filled with heavy weight indexes geared towards a variety of stock selection criteria. The venerable SPDR S&P 500 ETF (SPY) is the largest and most heavily traded of the top ten funds by asset size. SPY is known for its meaningful diversification, tremendous liquidity, and low costs. It’s the benchmark by which nearly every stock-focused strategy is ultimately compared against.
Having a benchmark is important because it allows investors the opportunity to compare similar investment styles to determine if a fund is meeting their expectations. It can easily identify consistent trends that are worthy of greater interest or evasion. One such outlier among the largest U.S. stock ETFs is the pattern of outperformance demonstrated by the PowerShares QQQ (QQQ) over the last decade.
ETF investors are spoiled by the tremendous number of quality choices for building their diversified stock allocations. The sheer breadth of selection across market cap, sector, industry, and factor-based strategies ensures there is something for virtually everyone.
Yet, one of the lesser understood qualities of exchange-traded funds are their ability to simplify your portfolio. You can own hundreds or even thousands of stocks in a single holding with extremely low costs and impeccable tracking efficiency. That eliminates the need to screen numerous positions and creates benefits of widening your exposure profile.