Live at Exchange: Avoid Emotions That Sabotage Returns | ETF Trends

Investors are bombarded with headlines and tweets on interest rates, the economy, and other key issues, emphasizing the importance of advisors learning how to help clients stay focused on their long-term financial plans.

Rather than reacting to every short-term movement and economic indicator, investors can benefit from tuning out the noise of short-term volatility and taking a long-term approach with higher quality companies, Chris Davis, CEO of Davis Funds, said at Exchange: An ETF Experience in an interview with ETF Trends and ETF Database’s head of research, Todd Rosenbluth.

“Study after study, they have no predictive value in aggregate,” Davis said. “We started in the late 1980s tracking the top strategists on Wall Street for their prediction on interest rates.”

After six months, Davis’ team would score if the strategists got the direction correctly — either higher or lower. Not by how much, nor by how many tightenings. 

“[They have been] wrong 67% of the time,” Davis said. “Two-thirds of the time, in the direction of whether six months from now, will rates be higher or lower?”

Davis’ firm entered the ETF market over five years ago with what Davis coined “unpopular” concepts.

“Our idea as investors is, ‘What will people wish they had done today, five years ago?’” Davis said. “So we’ve made categories that were so unpopular. Think about a concentrated-focus U.S. value approach. True active, totally different than indexes, no momentum strategy. Just deep value with enormous cash generation durable businesses.”

The fund, the Davis Select U.S. Equity ETF (DUSA), was modeled on a strategy that Davis’ firm had in place for 50 years — 50 years of beating the market over time and not in all parts of the cycle, demonstrating proven discipline. 

Davis Funds has capitalized on the “unpopular” ideas that are dependable, ignoring market noise, and outperforming the market over the long run. The firm has since launched the Davis Select Worldwide ETF (DWLD), the Davis Select Financial ETF (DFNL), and the Davis Select International ETF (DINT).

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