This article was written by Innealta Capital, a participant in the ETF Strategist Channel.

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IMPORTANT INFORMATION

The information provided comes from independent sources believed reliable, but accuracy is not guaranteed and has not been independently verified. The security information, portfolio management and tactical decision process are opinions of Innealta Capital (Innealta), a division of AFAM Capital, Inc. and the performance results of such recommendations are subject to risks and uncertainties. For more information about AFAM Capital, Inc. please visit afamcapital.com. Past performance is not a guarantee of future results.

Any investment is subject to risk. Exchange traded funds (ETFs) are subject to risks similar to those of stocks, such as market risk, and investors that have their funds invested in accordance with the portfolios may experience losses. The value of an investment and the return on invested capital will fluctuate over time and, when sold or redeemed, may be worth less than its original cost. This material is not intended as and should not be used to provide investment advice and is not an offer to sell a security or a solicitation or an offer, or a recommendation, to buy a security. Investors should consult with an investment advisor to determine the appropriate investment vehicle. Investment decisions should be made based on the investor’s specific financial needs and objectives, goals, time horizon and risk tolerance. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.

Sector ETFs, such as Real Estate Investment Trusts (“REITs”) are subject to industry concentration risk, which is the chance that stocks comprising the sector ETF will decline due to adverse developments in the respective industry.

The use of leverage (borrowed capital) by an exchange-traded fund increases the risk to the fund. The more a fund invests in leveraged instruments, the more the leverage will magnify gains or losses on those investments.

Country/Regional risk is the chance that world events such as political upheaval or natural disaster will adversely affect the value of securities issued by companies in foreign countries or regions. Country/Regional risk is especially high in emerging markets.

Emerging markets risk is defined as the chance that stocks of companies located in emerging markets will be substantially more volatile, and substantially less liquid, than the stocks of companies located in more economically developed foreign markets.

Fixed income (bond) ETFs are subject to interest rate risk which is the risk that debt securities in a portfolio will decline in value because of increases in market interest rates. Securities rated below investment grade, commonly referred to as “junk bonds”, may involve greater risks than securities in higher rating categories. Junk bonds are regarded as speculative in nature, involve greater risk of default by the issuing entity, and may be subject to greater market fluctuations than higher rated fixed income securities.

Diversification does not protect against loss in declining markets.

Registration of an investment adviser does not imply any certain level of skill or training.

The S&P 500 is an United States based stock index based on the market capitalization of 500 large companies listed on either the NYSE or NASDAQ stock exchanges. The S&P Dow Jones Indices maintain the S&P 500 index components and their weights.

It is not possible to invest directly in an index.

The Global Industry Classification Standard (GICS) is maintained by MSCI. The classification system was developed in 1999 by MSCI and Standard & Poor’s to capture the breadth and depth of industry sectors. The hierarchy contains 10 sectors, 24 industry groups, 67 industries, and 156 sub-industries.

S&P 500 sectors uses the GICS sectors and sub-industries to classify the 500 companies within the S&P 500 index. Thus the S&P 500 sector utilize the same logic as the GICS.

AFAM Capital, Inc. is an Investment Adviser, registered with the Securities & Exchange Commission and notice filed in the States of Texas, California and various other states. For more information, please visit afamcapital.com. Innealta is a division of AFAM Capital and specializes in the active management of portfolios of Exchange Traded Funds.

One of Innealta’s competitive advantages is its quantitative investment strategy. The firm’s products include Tactical ETF Portfolios, a U.S. Sector Rotation Portfolio and a Country Rotation Portfolio. Innealta attempts to beat appropriate benchmark performance in the long term by tactically managing portfolios utilizing a proprietary econometric model. By seeking to harness the potential benefits of ETFs, Innealta’s goal is to provide investors with exposure to multiple asset classes and investment styles in highly liquid, low cost portfolios. 272-AFAM-8/5/2016