As the markets ebb and flow, financial advisors can look to an all terrain exchange traded fund investment strategy to diminish pullbacks and still capture the upside.
On the recent webcast (available on-demand for CE Credit), All Terrain ETF Investment Strategies for 2017, Jerry Wagner, President and Founder of Flexible Plan Investments, explained that an all terrain strategy can help financial advisors handle potholes in the road through today’s volatile financial markets, reduce volatility and carve a narrow path through the financial forest.
Metaphors aside, the Flexible Plan Investment’s All-Terrain investing separately managed account service targets non-correlated asset classes through exchange traded funds to help advisors and clients diminish the negative effects of market volatility.
“Flexible Plan’s All-Terrain strategies seek to smooth the ride in rough investment landscapes,” Wagner said. They are “designed to provide protection in volatile markets while delivering absolute-return strategies for all market environments.”
Wagner pointed to some non-correlated assets, like gold and Treasury bonds, that have helped buoy a portfolio in case of a downturn in global equities.
Among its main strategies, Wagner explained that the All-Weather static portfolio attempts to create a portfolio for all market regimes, rebalances yearly and aims for long-term capital-gain tax treatment. The portfolio utilizes S&P 500, five types of bonds and gold asset classes to help even out the ride.
The All-Weather dynamic portfolio attempts to create a portfolio for all market regimes but rebalances on a monthly basis to potentially capitalize on short-term moves. Moreover, it is available in leveraged, with a maximum of 2x or 200% leverage, for more aggressive investors and unleveraged versions.
Additionally, the Triadvantage is a tactical strategy that takes advantages of low historical correlation between equities and gold while also providing the ability to move into bonds when either of those assets are underperforming. Specifically, it may hold a 50% stake in gold or the S&P 500 if the momentum indicator remains positive, but the 50% positions may shift into cash and bonds if the momentum sours.
Looking at various investors’ risk tolerance and investment goals, the all-weather dynamic unleveraged and all-weather static strategies may fall under a moderate portfolio target. The all-weather dynamic-leveraged and triadvantage-unleveraged fall under a growth target. Lastly, the S&P 500 index and triadvantage-leveraged may be perceived as more aggressive options.
Moreover, Wagner pointed to a balanced approach through Flexible Plan’s Brighter Beta strategy, which includes ETFs that try to exploit market inefficiencies based on fundamental investing. Brighter Beta starts with a universe of strategic- or smart-beta ETFs and screens for qualified funds after volume and bid-ask spread filters, a proprietary rescreening process and a so-called evolution algorithm.
Financial advisors who are interested in learning more about risk-managed investment strategies can watch the webcast here on demand.