On a weekly basis, VettaFi has sought to respond to advisor needs in a novel way. We asked questions about their views on the markets, what areas were of greatest interest, and what concerns they had. We tabulated the results, and we presented them to you with insights about the ETFs that we felt were representative of the views. We call the series ”Chart of the Week” and appreciate you consistently reading the pieces as well as sharing your feedback during regular webcasts. We recently looked to see what pieces resonated in the second half of 2022 and are showcasing them.
In July, we showed that just 5% of surveyed advisors chose international equity as their preferred asset class for the current environment, far below the 35% that chose U.S equity, the 21% that chose commodities, and the 20% that chose cash. So we highlighted some lower-risk, stronger-performing international equity ETFs like the Vanguard International High Dividend Yield ETF (VYMI) and the Invesco S&P International Developed Low Volatility ETF (IDLV).
In September, we were reminded that ETFs were not the only investments that advisors had in client portfolios. Indeed, four in 10 of those advisors that responded to a separate poll had less than 30% invested in ETFs, with nearly one in 10 holding less than 10% in the products. An additional three in 10 had between 30% and 50% of their portfolios tied to ETFs, while fewer than one in 10 were power users of ETFs and were investing more than 80% in ETFs. So we highlighted how ETFs like the Consumer Staples Select Sector SPDR (XLP) could be paired with direct stakes in dividend-paying cyclical companies like Apple and Home Depot, and how Xtrackers USD High Yield Corporate Bond ETF (HYLB) could be held with Treasuries and investment-grade corporate bonds to provide diversification.
In October, we noticed a shift in the way advisors were focused on dividend ETFs. When asked how they were using dividend strategies in client portfolios, 41% chose for capital appreciation/total return, while just 24% chose for income and 17% for volatility mitigation. At the time, the 10-year Treasury bond was yielding more than 4%, making higher-dividend-yielding ETFs less appealing. We highlighted the index-based Vanguard Dividend Appreciation ETF (VIG) and the actively managed T. Rowe Price Dividend Growth ETF (TDVG) as well suited for advisors seeking growth, not just income or defensive traits.
In November, we wrote articles about thematic ETFs and lower-risk strategies. First, we asked advisors, “Which clean energy opportunities offer the best forward returns?” and were pleasantly surprised that “energy (battery) storage” was the most popular with 51% of the responses, putting it ahead of hydrogen, electric vehicles, and wind/solar. This resulted in a dive into the differences between the Amplify Lithium & Battery Technology ETF (BATT) and the Global X Lithium & Battery Tech ETF (LIT).
Meanwhile, the majority of advisors separately told VettaFi their biggest goal for the next six months was to “mitigate their exposure to market volatility & downside risk.” This led us to highlight the iShares MSCI USA Min Vol Factor ETF (USMV) and the Innovator U.S Equity Buffer ETF (BNOV) as strong products for advisors seeking to participate in the potential market rally in the first half of 2023 but with protection against possible losses.