In times of market uncertainty, getting multi-asset exposure can help diversify a portfolio by adding uncorrelated assets to the mix in order to mitigate concentration risk in a particular asset class. But when an investor wants multi-asset exposure and income at the same time, there are ETFs to handle that: Invesco Zacks Multi-Asset Income ETF (CVY).
CVY is based on the Zacks Multi-Asset Income Index (Index). The Fund will invest at least 90% of its total assets in securities and depositary receipts that comprise the Index.
The Index is comprised of domestic and international companies, including US listed common stocks, American depositary receipts (ADRs) paying dividends, real estate investment trusts (REITs), master limited partnerships (MLPs), closed-end funds and traditional preferred stocks. The Index is computed using the gross total return, which reflects dividends paid.
CVY minimizes too much exposure to a certain stock with its highest allocation being 1.56% to Crestwood Equity Partners LP. Its sector allocation is top heavy with financials, real estate, investment companies, and energy.
The fund is starting to move towards the upside as of late with its 3-month trailing returns topping about 25% based on Morningstar’s numbers. Its currently trading above its 50- and 200-day moving average when looking at its year-to-date chart with its relative strength index (RSI) below overbought levels.
Reasons to Use a Multi-Asset Strategy
Getting exposure to a multi-asset strategy can afford the ETF investor with distinct advantages. As mentioned, it can help minimize downside risk and here are other reasons from a Fidelity article:
- Long term stability through exposure to a range of asset classes that will react in different ways to the same market event.
- Smoother returns at lower levels of volatility than investing in just one single asset class.
- Sustainable income through accessing a diverse range of asset classes that can generate income in all market environments.
- Knowing that an expert manager is taking care of all asset allocation decisions, whatever the market conditions.
- Cost-efficiency, given the economies of scale afforded to a mutual fund means the cost of accessing many asset classes is much lower than those available to a retail investor.
A best case scenario in market history where a multi-asset strategy would’ve been useful was the Financial Crisis in 2008.
“This event showed investors that diversifying your portfolio with only equities and bonds was simply not enough to avoid a serious loss of capital,” the article aid. “Both equities and bonds fell in unison, leading investors to seek out other solutions that were truly diversified, and blend a wider range of less closely correlated asset classes.”
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