TD Ameritrade: Dave Nadig Talks Diversification In A Flexible ETF Wrapper

Diversification is always key to successful investing, and it’s a great way to get into some ETF education. ETF Trends’ CIO and Director of Research, Dave Nadig, was on hand to discuss some notable ETFs that would serve long-time investors well with TD Ameritrade’s Nicole Petallides during “Market Overtime.”

Nadig stars by noting how ETFs truly are great for offering diversification in a single-step package. With that in mind, he explains a few interesting things ETFs have provided, including the process of becoming hyper-diversified or anti-diversified, all within an ETF wrapper.

Starting on the diversified side, Nadig brings up the Nationwide Maximum Diversification U.S. Core Equity ETF (MXDU), which picks a set of large-cap U.S. stocks that are mathematically the least correlated, to maximize the diversification of the portfolio, as the name of the fund suggests. As a result, the fund solves the risk problem by keeping up that level of diversification.

Nadig adds, “You can definitely get diversified with almost any ETF, but if you really want to go diversified, you can go really deep here.”

A set of newer funds Nadig points to comes from Simplify ETFs that take themes that investors have been playing with single stocks. These ETFs are the Simplify Volt RoboCar Disruption ETF (VCAR), the Simplify Volt Fintech Disruption ETF (VFIN), the Simplify Volt Pop Culture Disruption ETF (VPOP), and the Simplify Volt Cloud and Cybersecurity Disruption ETF (VCLO).

Profit Off Different Approaches

Compared to MXDU, this suite of funds takes the opposite approach. Here, investors are looking at a hyper-concentrated portfolio (of just TSLA in the case of VCAR), and both protecting investors’ downside with puts and enhancing their upside with calls. This actually lets investors profit from what they see in the market, meaning huge idiosyncratic moves.

One of the more interesting funds in this suite may be VPOP. It’s a pop culture ETF that has some unexpected names, such as Spotify or Snap. It makes for an interesting way to think about the market. And as Nadig has made clear, regardless of the level of diversification, it can all still be handled within an ETF wrapper.

To apply these thoughts to a post-pandemic recovery, Nadig explains how looking past the work from home-type stocks such as Zoom or other cloud computing-related stocks, it’s easy to see the market now moving towards recovery traits.

Nadig states, “I think some of the more interesting sectors of the economy are things like energy and airlines; things that got hurt really badly. As we look towards stimulus packages and where the economies are globally going to be able to reopen, I think there are going to be some really interesting opportunities there.”

International diversification could also be key here. Nadig believes people are worried about the state of the U.S. dollar and noticing how China was up 2% overnight. It could mean a lot for emerging markets.

For more market trends, visit ETF Trends.