Risk Weighting Portfolio Strategies to Build a Better Core

Among the various market factors that has produced a premium over the years, USAA focused on the value and momentum factors to enhance their investment objectives. Humphrey argued that value and momentum has helped investors generate attractive risk-adjusted returns over time. By complimenting a passive ETF portfolio with factors and active bond strategies, an investor may enhance their overall returns over time and diminish drawdowns during more volatile conditions.

USAA ETFs to Better Manage Risk

To help investors better manage risks and access the markets in a smarter way, USAA has launched two actively managed bond ETFs and four smart beta stock ETFs, including USAA Core Short-Term Bond ETF (NYSEArca: USTB), USAA Core Intermediate-Term Bond ETF (NYSEArca: UITB), USAA MSCI USA Value Momentum Blend Index ETF (NYSEArca: ULVM), USAA MSCI USA Small Cap Value Momentum Blend Index ETF (NYSEArca: USVM), USAA MSCI International Value Momentum Blend Index ETF (NYSEArca: UIVM) and USAA MSCI Emerging Markets Value Momentum Blend Index ETF (NYSEArca: UEVM).

To build a better core portfolio, Humphrey argued that investors should consider building a globally diversified portfolio, focus on long-term proven equity factors and include skilled actively managed fixed-income.

Based on historical relationships, expected returns in international and emerging markets appear more favorable. Academic research suggests that focusing on stock companies with factors like attractive valuations and improving momentum have led to higher excess returns. Lastly, with interest rates near their all time low levels, investors should consider adding higher-yielding, actively managed fixed income to their portfolios.

Financial advisors who are interested in learning more about portfolio construction can watch the webcast here on demand.