Thursday’s trading session induced a lot of seasickness in the capital markets. The major stock market indexes were rocking up and down following the invasion of Russia into Ukraine.
That said, amid volatile markets, it can be tempting to simply watch your portfolio shrink and then expand, hoping for the best. As opposed to simply sitting on the sidelines with cash, however, some financial advisors suggest that it’s best to put your money to work and be proactive with your portfolio.
“With volatility typically comes opportunity, and we’re advising clients to take action,” said Vance Barse, wealth strategist and founder of Your Dedicated Fiduciary, in a CNBC article.
One way to take action is to add more quality names to a portfolio. While the thought of poring over copious amounts of financial data to find quality names might not be everyone’s cup of tea, there’s an easier way with exchange traded funds (ETFs).
An ETF With an Eye on Quality
One way to get quality in the convenience of an ETF wrapper is the FlexShares US Quality Large Cap Index Fund (QLC), which seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Northern Trust Quality Large Cap Index. The underlying index is designed to reflect the performance of a selection of companies that, in aggregate, possess greater exposure to quality, value, and momentum factors relative to a universe of publicly traded U.S. large-capitalization equity securities.
QLC’s name might say quality, but the fund employs a multi-factor strategy. Doing so not only captures the upside in quality, but also momentum and value.
“We believe employing a multi-factor approach to a large-cap equity portfolio may deliver higher risk-adjusted returns to investors,” FlexShares said. “While factors work well in isolation, the combination of the factors—and how they are combined—is also important.”
“NTI selected the quality, momentum and value factors based on their historical long-term return premiums,” FlexShares added. “NTI researchers also determined the process for combining them quite deliberately, drawing on proprietary testing around the metrics in each category that offer the greatest efficacy.”
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