ETF Investors Hang Tough While Mutual Fund Shareholders Exit

As part of the agreement, both nations agreed to withhold imposing further tariffs on each other for 90 days while they work out a firm, ironclad deal to start 2019. However, volatility continues to rack U.S. equities as the reality of a permanent trade agreement is still open for discussion with contentious topics like forced technology transfer and intellectual property possibly derailing negotiations.

Quality Options

As 2018 becomes 2019, investors can wash their hands of the last few months of volatility and look to ETFs that take advantage of the shift from the growth-fueled investments during the extended bull run to a focus on the quality of investments–being selective and using due diligence as screeners to find the best-performing stocks.

As such, Lydon mentioned investors flocking to funds like the iShares Edge MSCI USA Quality Factor ETF (BATS: QUAL). QUAL seeks to track the investment results of the MSCI USA Sector Neutral Quality Index composed of U.S. large- and mid-capitalization stocks with quality characteristics as identified through certain fundamental metrics.

“We’re seeing big shifts into quality stocks and quality ETFs,” said Lydon.

“It’s a great opportunity to get some bread and butter stocks in your portfolio if you’re worried about volatility and you’re worried about big margins, these are the quality stocks that a lot of people are shifting to,” said Lydon.

Getting Disruptive in 2019

Whether we like it or not and whether we want it or not, disruptive technology in the form of robotics, artificial intelligence (AI), machine learning, or any other type of disruptive technology is the next wave of innovation that will permeate all sectors in some form or fashion. To take advantage of this transformative movement, Lydon suggests looking at the ARK Innovation ETF (NYSEArca: ARKK).

ARKK’s focus is primarily on domestic and foreign equity securities of companies that coincide with the ETF’s investment theme of disruptive innovation–a technology or strategy that disrupts the status quo and develops its own niche market. ARKK invests in both developed and emerging markets with the intent to use American Depositary Receipts (ADRs)–securities offered in the U.S., but are offered as a specified number of shares in a foreign corporation.

For investors who missed out on the serendipitous run of FAANG (Facebook, Amazon, Apple, Netflix, Google) stocks, disruptive options like ARKK could be the next tech wave.

“If you wish you took advantage of FAANG stocks 10 years ago, you might have the opportunity for the newest FAANG stocks, which might be in areas like robotics, automation and genome sequencing,” said Lydon.

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