Core Equity Concerns? This Model Portfolio Has You Covered

The WisdomTree Core Equity Model Portfolio is ideal for accessing some of the trends proving sturdy in the first quarter – ones that are likely to be durable for some time.

“This model portfolio is designed for growth-oriented investors with a long-term horizon looking to maximize long-term potential for capital growth through a globally diversified set of equity ETFs,” according to WisdomTree.

The utility in this model portfolio is its reach into large-, mid- and small-cap stocks and international equities, making it an ideal way for playing the reflation trade.

Reflation Perks and More

Another benefit of this model portfolio is a quality tilt that’s vital to success with smaller stocks.

“When investing in small-cap stocks, we believe that quality should be an essential screen, given the growing number of ‘zombie’ companies that occupy the small-cap space—companies that are barely generating enough cash flow to cover interest expenses and rely instead on borrowing and other sources of financing to stay afloat,” notes Scott Welch, WisdomTree chief investment officer – model portfolios.

Several of the ETFs in the model portfolio feature exposure to the quality and value factors. The former is usually persistent, while the latter appears to be awakening from a long slumber.

“Also relative to the MSCI ACWI Index, we are over-weight in small cap and value stocks. The WisdomTree product set tends to ’tilt’ this way, based on the various screens we apply to our underlying Indexes. So, even though all our models are ‘open architecture’ in that they include both WisdomTree and third-party strategies, we will normally have inherent small-cap and value tilts to our portfolios,” according to Welch.

One of the ways this model portfolio ameliorates concerns surrounding lower quality small caps is with exposure to the WisdomTree U.S. SmallCap Dividend Growth Fund (NasdaqGM: DGRS).

DGRS 1 Year Performance

DGRS tracks the WisdomTree U.S. SmallCap Dividend Growth Index, which is weighted by fundamental factors such as growth expectations, return on equity, and return on assets, according to WisdomTree.

For more on how to implement model portfolios, visit our Model Portfolio Channel.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.