Market segments will perform differently during various economic cycles, and as the U.S. may be heading toward the late business cycle, exchange traded fund investors should consider which areas could drive returns or increase portfolio risks.
On the upcoming webcast, Finding Strategic and Cyclical Exposure: Sector and Factor Investing, Denise Chisholm, Sector Strategist att Fidelity Investments, and Darby Nielson, Managing Director of Research at Fidelity Investments, will explain market behaviors during varying economic cycles and the ways both factor and sector investing can provide exposure to the market, diversification benefits and potentially enhance an investment portfolio.
For example, Fidelity offers a suite of smart-beta, factor-based ETF strategies that leverage decades of analysis and research out of Fidelity’s quant team to potentially help investors generate improved risk-adjusted returns.
Fidelity’s line of factor based ETFs include the Fidelity Dividend ETF for Rising Rates (NYSEArca: FDRR), Fidelity Low Volatility Factor ETF (NYSEArca: FDLO), Fidelity Momentum Factor ETF (NYSEArca: FDMO), Fidelity Quality Factor ETF (NYSEArca: FQAL), Fidelity Value Factor ETF (NYSEArca: FVAL) and Fidelity Core Dividend ETF (NYSEArca: FDVV).
The suite of single-factor ETFs focus on a single intended exposure. FDRR is designed to reflect the performance of stocks of large and mid-capitalization, dividend-paying companies expected to pay and grow their dividends and have a positive correlation of returns to increasing 10-year U.S. Treasury yields.
FDLO covers large- and mid-cap U.S. companies that exhibit lower volatility than the broader market. Holdings include those that show historically low volatility of returns, low beta (a measure of market sensitivity) and low earnings volatility.
FDMO includes large- and mid-cap U.S. companies that exhibit positive momentum signals. Companies include those with historically high total and volatility-adjusted returns, high positive earnings surprises and low average short interest.
FQAL follows large- and mid-cap U.S. companies with higher quality profiles than the broader market. The underlying index focuses on companies with historically high free–cash-flow margins, high returns on invested capital and high-free-cash flow stability.
FVAL covers large- and mid-cap U.S. companies that have attractive valuations. Components exhibit historically high free-cash-flow yields, low enterprise value to EBITDA (earnings before interest, taxes, depreciation and amortization), low price to tangible book value and low price to future earnings.
FDVV is designed to reflect the performance of stocks of large- and mid-capitalization dividend-paying companies that are expected to continue to pay and grow their dividends.
Financial advisors who are interested in learning more about cyclical investment strategies can register for the Thursday, March 16 webcast here.