The exchange traded fund iShares S&P Aggressive Allocation (NYSEArca: AOA) holds both stocks and bonds and automatically rebalances, all for a low fee. The aggressive nature of this fund of ETFs gives a tilt toward the equity market.
“It is intended to serve as an investor’s core holding, either by itself or paired with a few alpha-seeking active funds. For investors who do not have the time or inclination to research, monitor, and rebalance multiple funds, allocation funds such as this provide a simple and effective solution,” Michael Rawson for Morningstar wrote in a recent article. [Target-Date ETFs Keep it Simple]
This ETF of ETFs invests in 8 iShares ETFs, and covers both domestic and international stocks and bonds. All of the funds included in the portfolio are high-quality and enhance the allocation style of the ETF, reports Rawson. [What’s Driving the ETF Boom]
The automatic rebalance feature of AOA is a key benefit. This keeps the risk factor lower and avoids weighting too heavily toward any particular sector or asset class. Asset allocation funds are perfect tools for investors that buy-and-hold and forget to rebalance regularly or are too busy to deal with it. About the only factor that must be determined by the investor is risk tolerance.
The financial crisis in 2008 has many investors reassessing their risk tolerance, as well as the volatility levels in their portfolios. According to Morningstar, the S&P 500 has gained just 4.1% per year annualized over the last decade, while the Barclays Aggregate Bond Index has gained 5.7% over the same period . This exemplifies the need for a decent equity and bond allocation in any strategy.[Multi-Asset ETFs for the Long Term]
Lastly, the 0.33% expense ratio makes this ETF as affordable as it is convenient. Although this is higher than the average iShares ETF expense, the automatic rebalance feature should be factored in.
iShares S&P Aggressive Allocation
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.