Displaying items by tag: ETFs

The bond market is experiencing a notable transformation, similar to what the equity market saw with the "barbell effect." Investors are splitting their capital between low-cost passive funds like ETFs and high-return alternatives like private credit, while traditional active managers are struggling to stay competitive. 

Bond ETFs have gained ground, fueled by rising interest rates, offering lower fees and better liquidity. Meanwhile, regulations are pushing banks to offload risky debt, increasing partnerships with private credit firms. 

This shift is spurring innovation, and major players are betting on private credit becoming a mainstream asset class.

Finsum: Seeing how the long-term impact of private credit affects the bond market will be worth monitoring tightly over the coming years but more immediately, this rate cycle.

Portfolio construction is crucial for any investor, whether a beginner or experienced, as it helps balance risk and maximize returns. The key is to ensure each investment serves a specific purpose within the portfolio, rather than just collecting assets. 

Diversification, or spreading investments across different asset types, reduces risk by balancing higher-risk stocks with safer options like bonds. ETFs, particularly passive ones, offer a simple and cost-effective way to achieve diversification, providing exposure to a wide range of assets. 

Understanding your risk tolerance is vital, as it influences your portfolio's composition. Lastly, keeping long-term goals in mind is essential for managing both risk and return.

Finsum: Advisors could really benefit by integrating basic portfolio metrics into their calculations, such as Sharpe and Sortino ratios. 

The domestic broad-market ETF sector is highly competitive, with popular options like Vanguard's and iShares' total market and S&P 500 funds. While these funds offer low costs, blended styles, and broad sector coverage, there are lesser-known alternatives worth considering. 

For broad U.S. market exposure, the Schwab U.S. Broad Market ETF (SCHB) and the SPDR Portfolio S&P 1500 Composite Stock Market ETF (SPTM) provide similar market coverage at lower costs. For those focused on large-cap exposure, the SPDR Portfolio S&P 500 ETF (SPLG) and BNY Mellon US Large Cap Core Equity ETF (BKLC) offer even lower expense ratios. 

Using these alternatives can enhance tax-loss harvesting strategies while maintaining market exposure. By diversifying beyond the usual Vanguard and iShares funds, investors may find cost savings and strategic benefits.

Finsum: You can still implement thematic investing with these ETFs, so keep this in mind when making decisions. 

This year, the focus on managing downside risk in portfolios has become crucial, particularly with the looming presidential election, anticipated Federal Reserve rate cuts, and global geopolitical challenges. 

Buffer ETFs have gained traction as a solution, offering a combination of market participation and capital preservation in a straightforward, single-ticker format. These ETFs cater to varying time horizons, allowing investors to tailor their protection strategies accordingly. As more product providers enter the Buffer ETF space, it's essential to conduct thorough research, as the specific design and strategy of each ETF can significantly impact outcomes. 

Innovator ETFs, a pioneer in this category, recently introduced Managed Floor ETFs, which differ from defined outcome ETFs by offering ongoing protection without limiting the potential for market gains. These newer ETFs provide greater flexibility, making them suitable for continuous integration into portfolios rather than being tied to specific time frames like some other strategies.

Finsum: The fees can be a critical issue with these products so manage to understand exactly how the product will pay off to take full advantage of the strategies. 

Amplify ETFs has launched the Amplify CWP Growth & Income ETF (QDVO), further expanding its suite of income-focused funds. QDVO aims to deliver high total returns by strategically investing at least 80% of its assets in growth-oriented U.S. equities, while also generating high monthly income through an opportunistic covered call writing strategy. 

This approach targets around 4-6% income from option premiums and up to 2% from dividends. QDVO is designed to complement Amplify's other successful ETFs, DIVO and IDVO, offering a diversified strategy for optimizing portfolios in various market conditions. 

The ETF seeks to provide investors with a balanced approach to growth and income, making it an attractive option for those looking to enhance their portfolios.

Finsum: Pairing income with an active ETF might make the most sense as we head into the final bout with inflation in the fall.