Despite growth stocks’ recent rally, many advisors are still increasing allocations to value stocks.
With recent significant market turbulence and attractive yields in fixed income, many clients are hesitant to get back into equities. However, with equities playing a crucial role in portfolios, advisors can help clients comfortably get back into the market by tilting portfolios toward value.
In a recent poll of advisors, over 35% of respondents said they planned on increasing equity exposure/beta over the next six months. In the same poll, 45% of respondents said they planned on increasing their allocation to value, according to Why Valuation Matters in Today’s Market (Date: July 20, 2023. Sample size: 330 attendees, 30% RIAs).
Multifactor ETFs may be the solution for investors want to own equities but want to position for less risk. Multifactor ETFs seek to target desired return-enhancing factors and reduce exposure to unrewarded risk exposures, enabling investors to take smarter risks.
A multifactor strategy targeting value stocks with lower volatility may help investors maintain their desired exposure during choppy markets. After all, investors who reduce exposure in response to a down market largely underperform investors who maintain exposure and do not try to time the market.
Therefore, advisors can help clients hold positions more comfortably by reducing volatility with a multifactor ETF such as the Hartford Multifactor US Equity ETF (ROUS).
See more: “The Different Use Cases for U.S. Equity Funds ROUS and HDUS”
How ROUS Can Help Clients Own Equities With Less Risk
ROUS seeks to reduce volatility by up to 15% over a full market cycle while maintaining strong fundamentals. Nearly 75% of ROUS’s holdings demonstrate lower volatility than the Russell 1000 Index. ROUS has had a beta of 0.86 since 2019, as of March 31.
The multifactor ETF reduces concentration at the sector, market cap, and individual holding levels, enhancing diversification and limiting concentration risk. The fund limits a single stock’s weight to 1.5% of the portfolio, making ROUS look very different than top-heavy benchmarks.
For more news, information, and analysis, visit the Multifactor Channel.
Investing involves risk, including the possible loss of principal.
This article was prepared as part of Hartford Funds paid sponsorship with VettaFi. Hartford Funds is not affiliated with VettaFi and was not involved in drafting this article. The opinions and forecasts expressed are solely those of VettaFi. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, a recommendation for any product or as investment advice.