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By Crystal McClenthen

It’s not a new concept: try to bet on the winner, hopefully come home with the cash. When talking about investing, Warren Buffett has said it best: “It’s better to buy a wonderful company at a fair price than a fair company at a wonderful price.” The challenge, of course, is twofold. First you must, somehow, find a way to identify “wonderful” companies. Second, you must be able to wisely incorporate those companies into your overall portfolio in a way that not only helps ensure diversification, but also aims to protect your assets in an environment of high market volatility and rising interest rates. But how?

One possible solution is to carefully pick what you believe will be the winners (more on that in a minute!) and build them into a Smart Beta ETF that seeks to provide the ability to gain access to a single risk factor at a lower cost point. And while there are as many strategies out there as there are ETFs, here’s why a strategy designed to pick the winners may be the right route to help your clients achieve the outcomes they’re seeking today—even in this wild ride of a market.


Ever since 2008, investors have been looking for innovative ways to try to tackle the challenge of growing and protecting assets in the face of extreme market swings and a stagnant interest rate environment. It hasn’t been easy, but one strategy that has proven popular has been flowing assets into both dividend yield and minimum volatility solutions. It’s no mystery why this approach has been attractive to investors in recent years, and in many cases it has served its purpose, but rising interest rates may demand a shift in strategy.

To design an ETF strategy that has the potential to perform amid the current changes, it’s important to look at the performance patterns of today’s high dividend solutions to understand how they might react when interest rates begin to normalize. Will the strategy still deliver value? For dividend solutions, which potentially “wonderful” companies have the financial flexibility to sustain their current dividend policies? One approach is to try to develop a better index—one that seeks to provide investors with high income (via dividends) and earnings growth potential (via share repurchase programs)—that may work in a dynamic interest rate environment.