ETF investors can seek to grow wealth by investing for the long term, but there are still downturns along the way that could be major setbacks to returns.
On the upcoming webcast, Improve the Traditional Buy-and-Hold Strategy, Robert Schuster, Senior Director of Ned Davis Research, and Stephen Blumenthal, Chief Investment Officer and Chief Executive Officer of CMG Capital Management Group, will discuss how a rules-based dynamic strategy, driven by the institutional expertise of Ned Davis Research, may help improve long-term equity investing by managing the drawdown risk typical of static allocations.
Specifically, the VanEck Vectors NDR CMG Long/Flat Allocation ETF (NYSEArca: LFEQ) can provide investors with an investment solution that offers a systematic approach to preserve capital by increasing cash when market health is weak while participating in uptrends with a full allocation to equity.
The ETF strategy tries to reflect the performance of the Ned Davis Research CMG US Large Cap Long/Flat Index, which follows trade signals that dictates the portfolio’s equity allocation ranging from 100% fully invested or “long” S&P 500 exposure to 100% in cash or “flat” Solactive 13-week U.S. T-Bills.
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The index’s model follows a two-step process. The first step measures trend following and mean reversion within the S&P 500 industry groupings to determine a bullish or bearish market environment. Additionally, the model applies a risk filter process to ensure that all of the price-based industry level indicators are effective over time.
The second step calculates the scores taken from the first phase to produce the equity allocations of the index. When the index is not completely long or flat, either 80% or 40% of the portfolio will be allocated to the S&P 500, with the remainder allocated to the Solactive 13-week U.S. T-bill Index.
While investors may buy-and-hold various asset categories to diversify risk in case of a market pullback, a diversified portfolio may still ride the fall-out. Alternatively, investors can consider this long-flat ETF strategy as a way to directly limit against downside risk or generate improved long-term, risk-adjusted returns.
Financial advisors who are interested in learning more about a long-term investing strategy can register for the Wednesday, December 6 webcast here.