Written by David Fabian, May 12th, 2017
The ETF world is full of articles touting the advantages of mega-firms like Vanguard, BlackRock, and State Street. These companies have set the bar high for delivering exceptionally transparent, diversified, low-cost, and liquid vehicles to every American investor. Read more
Written by David Fabian, February 07th, 2017
Ask a room full of experts what the most important part of a successful investment strategy is and you will likely get a range of candid responses. Most would gravitate towards answers like security selection, position size, time, or cost as their primary recommendations.
Those characteristics are certainly important and should not be overlooked. However, the data behind ETF asset flows and fund returns continues to signify a tremendous deficiency in net performance for individual investors. Much of this gap can be attributed to behavioral choices – i.e. buying high or selling low.
Written by David Fabian, June 07th, 2016
As exchange-traded funds have evolved over the years, we have seen greater interest in funds that screen for a specific factor. This may include historical volatility, size, momentum, or even “quality” characteristics. This last term in particular is one that is often used with great reverence, but may mean vastly different things to different investors.
Quality can stand for superior products or services, low debt ratios, profitability trends, sustainable dividends, or stable earnings growth. In practice, several of these screens may applied to a large universe of stocks in order to find companies showing superior balance sheet characteristics versus their peers.
Written by David Fabian, February 17th, 2016
This article is the first in a series co-authored by David Fabian (fmdcapital.com) and Aaron Jackson (jacksonstocks.com). Each week we will be unlocking the secrets to some of the most talked-about exchange-traded funds in the market. The goal is to better understand what you own or elevate new ideas to the forefront of your watch list.
Many investors have been caught off guard this year with the sharp drop in stocks combined with a rush to safety in traditional defensive asset classes. This week we will be reviewing a trio of diversified ETFs designed to hold stocks with lower historical price fluctuations than traditional market-cap weighted benchmarks. These tools can be useful for more conservative investors that are seeking to maintain an allocation to stocks with the goal of mitigating downside risk. 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.