If you’re new to investing, you’ll be facing mountains of information that can seem daunting. Learning how to invest can be just as difficult as figuring out what to invest in, especially if you are trying to keep your money safe. At 1879 Advisors, we want to guide you to fruitful returns in a fiscally safe fashion. One of the ways we accomplish this goal is through our Tactical Equity Strategy. This strategy is designed to secure long-term capital gains by investing in a diverse portfolio of equity ETFs.
What are They?
ETF stands for Exchange Traded Fund. In simple terms – when you buy a stock share, you’re buying a unit of ownership in a company, which is a singular investment, the success of which is determined by the company's success. A fund, on the other hand, is a portfolio of diversified assets in many companies. Exchange-Traded Funds are funds that are traded freely on an exchange and you can track their prices.
ETFs come in many shapes and sizes. Some are a conglomeration of different types of investments in other industries. Still, commonly, they tend to hold shares in similar companies in the same industry, for example real estate, oil, or precious metals. ETFs can also be dedicated. They tend to hold different types of assets, so instead of just holding stock shares, they can also hold bonds or similar assets.
Why Choose to Invest in ETFs?
The two factors that make ETFs attractive to investors are security and freedom.
Exchange-Traded Funds offer a higher level of security than investing in individual stock shares. When you buy a share of stock, the outcome of your investment depends entirely on how well that company does. However, ETFs are built to be diversified. Investing in this option provides you small shares with a wide range of investments. This makes your investment safer because although a single company can fail, it is improbable that a combination of investments in an industry suffers the same fate.
There are two main types of Funds – Exchange Traded Funds and Mutual Funds. They both do similar things because they both hold a wide range of investments. However, there is one crucial difference. When you buy or sell shares from a Mutual Fund, you are buying or selling directly to the Mutual Fund company itself based on the daily appreciation of its shares.
Exchange-Traded Funds, however, are bought and sold on an exchange between investors without restrictions. This means you have greater freedom to purchase and buy at more flexible appreciations that are not set by the fund. While both funds establish a Net Asset Value every day for their stock prices, those prices are set in stone for Mutual Funds, while with ETFs there are other elements published daily that determine their value; Net Asset Value, shares outstanding and accrued dividends.
What are the Different Types of ETFs?
ETFs run the gamut when it comes to options and focuses. Some hold assets from many different types of companies across many industries, others only hold shares of companies from a specific country, and others only focus on a single industry. ETFs usually hold equity (share of stock), but many hold non-equity assets such as currency, bonds, or commodities. Some common examples of equity ETFs include:
Funds that focus on acquiring bonds. This can be government, corporate, state, or local bonds.
These invest in currencies such as the U.S. dollar or the Euro.
Invest in companies offering similar products or services in a given field like restaurants or clothing companies.
Funds that invest in companies that pay dividends to shareholders.
Invest in companies based outside of the U.S.
Our Approach to Exchange Traded Funds
Our goal is long-term capital appreciation. We do this by breaking up investments in equity ETFs into two parts.
35% goes to a diversified central portfolio, which ensures market exposures throughout a market cycle.
65% of the portfolio is invested in sectors and countries, showing both general growth and positive growth momentum. This portfolio could hold up to 65% in cash as a means to secure your position until market trends recover.
This strategy is designed to buy into markets showing positive trends while limiting investments in markets showing negative trends.
There are thousands of ETFs in the market, but some have higher risks than others. Our team employs a rigorous screening process in which we use strict criteria like cost, trading volume, and record to identify the lower risk and most promising investment opportunities. We do this to give you the best possible options while limiting your risk.
Our investment management team closely monitors those ETFs we have identified as suitable offerings for our clients. We rank them based on a series of complex metrics and assign them a status of A, B, C, or D. We only invest in ETFs ranked at an A. If an ETF fell to C, it’s placed on a watch list, which could trigger a sale at the end of the month once we have re-screened the fund. This means our strategy is always changing to give the optimal options and keep your money as safe as possible.
Interested in Investing in ETFs?
At 1879 Advisors, we pride ourselves on our thorough investment strategies. We carefully curate your investment offerings, so you’re only choosing from what our team of experts deems to be the opportunities with the most potential and least amount of risk. Call us today to get started!
* Please consider the investment objectives, risks, charges and expenses of the ETF carefully before investing. Read the prospectus carefully before you invest or send money. ETFs are actively managed and do not seek to replicate the performance of a specified index. ETFs may have a higher portfolio turnover than funds that seek to replicate the performance of an index. Not insured by FDIC/NCUSIF or any federal government agency. Not bank guaranteed. Not a deposit. May lose value. Securities offered through Bruderman Brothers, LLC, an SEC registered broker-dealer, member FINRA and SIPC. Investment Advisory Services through Bruderman Asset Management, LLC, an SEC registered investment advisor (copy of current Form ADV Part 2Aand FORM CRS) are available upon request or at ).