Tag Archives: nasdaq
The V20 Portfolio Week #17: It’s Difficult To Be Different
The V20 portfolio is an actively managed portfolio that seeks to achieve an annualized return of 20% over the long term. If you are a long-term investor, then this portfolio may be for you. You can read more about how the portfolio works and the associated risks here . Always do your own research before making an investment. Read last week’s update here ! Current Allocation *Only available to Premium Subscribers Planned Transactions *Only available to Premium Subscribers ————- In the first weekly update of 2015, I stated that history may be repeating itself. Now that a month has gone by, it is evident that the V20 Portfolio is again experiencing the pain it had to endure in January 2015. Over the past week, the V20 Portfolio declined by 5.2% while the S&P 500 appreciated by 1.7%. Year to date, the V20 Portfolio declined by 16.3% and the S&P 500 declined by 5.0%. This compares to a 15.5% loss and 1.3% decline in January 2015 for the V20 Portfolio and the S&P 500, respectively. Portfolio Commentary Despite the ongoing volatility in the portfolio and the broader market, our holdings (for the most part) have been incredibly boring. There were no surprise developments or unexpected setbacks (at least on a company level). Last week I talked about how the meltdown in the junk bond market affected Intelsat (NYSE: I ), these things are completely out of our hands, but unfortunately, we must live with the short-term consequences. Despite the lack of excitement, the V20 Portfolio dramatically underperformed in the first month of 2016. While I am not very concerned, I am sure some of the readers may not feel the same way. While investing in the most undervalued companies will deliver the best return over the long-term, investors will inevitably face periods like the one we are experiencing today. Despite their transitory nature, there is no easy way to deal with short-term losses. It may be disheartening to see your holdings decline in value after spending so much effort doing research, but when you come to terms with the fact that the market can be irrational (and stay that way), the “losses” become more digestible. As I’ve mentioned in the introduction to the V20 Portfolio, the portfolio seeks to achieve long-term gains . Whether a stock goes up or down in a particular month, day, or even a year, is irrelevant to us. Most of the time, undervalued companies eventually converge to their fair value as temporary negative sentiment fades away. Unfortunately, there is no set timeline for this convergence. Ultimately the valuation of the business is not impacted by the stock price. If a business is well-run, it will continue to create value even when the stock price is declining (cyclicality aside), meaning that the discount will grow larger, making it more attractive. There is no telling where the market will trend in the coming months. But irrespective of the result, the V20 Portfolio will continue to have an unwavering focus on the fundamentals. Performance Since Inception Click to enlarge
ETF Trends For 2016: Part 2, Robo-Advisors
In part 1 of this series we reviewed the growth of the ETF market in 2015 and introduced the series by covering currency hedged products. In part 2, we are going to take a brief look at a well-covered topic that could have a huge impact on the way ETFs are utilized: Robo-Advisors Robo-Advisors & The Rise Of The Machine In the last few years investors have not only embraced ETFs but the ways by which they manage their ETF investments. Robo-Advisors are, according to Investopedia: Online wealth management services that provide automated, algorithm-based portfolio management advice without the use of human financial planners. While older, wealthy investors have traditionally been wary of putting their money in non-human hands and valued human guidance, younger clients are more and more frequently selecting robo-advisors. According to a recent Spectrum study : 17% of investors 35 and younger and 11% of those ages 36-44 currently use a robo-adviser, compared with 6% of those 45-54, 4% of those 55-64 and 4% of those 65 and older. Younger investors are, as a rule, more willing to shift where their money is invested and try new technologies. If one platform doesn’t work out, they won’t waste time to see if the company improves next year, and there are more than enough platforms to try something different. Firms like Betterment and Wealthfront have exploded on this relatively new scene, with over $3 billion and $2 billion in AUM, respectively. However, well established financial firms like Schwab (NYSE: SCHW ), BlackRock (NYSE: BLK ), Fidelity and Vanguard have all seen the benefits of creating their own robo-platforms as a new source for revenue. After attending the 20th Annual IMN Global Indexing and ETFs conference in Scottsdale this December, Josh Brown of Ritholtz Wealth Management summarized the audience’s feelings on robo-advisors: The crowd here is very curious about how to implement the technology; there isn’t any concern about the B2C robos as competitors. The prevailing feeling is that their AUM growth has already peaked while Vanguard and Schwab have stolen their thunder. While the conference audience, mostly made up of RIAs and financials advisors, might think this market has reached its peak, market research data tends to disagree. Below is the expected growth in AUM by robo-advisors from consulting firm A.T. Kearney, as reported by Bloomberg . Click to enlarge Clearly, this is a trend to watch in the coming years, but what will it mean to ETF investors and issuers? During an interview with FinancialPlanning.com, Dodd Kittsley, head of ETF strategy and national accounts at Deutsche Asset & Wealth Management of Deutsche Bank (NYSE: DB ), stated the following when asked how robo-advisors affect ETFs: It really opens an avenue to a different investor base. I think certainly that’s going to be a continued catalyst for growth in the industry. For these robo-advisors, certainly much of their objective is to deliver strategic allocation models for long-term investors; and ETFs, when you think about it, are the purest way to execute on an asset allocation strategy. If you just finished this piece and find yourself wondering if robo-advisors are for you, I would refer you to David Fabian ‘s advice from 2014, when robos were just starting to gain traction in the market: At the end of the day, each investor considering a robo-advisor over a traditional asset manager should compare the cost savings with any additional value-added services that may be offered. In addition, an asset manager may have a unique philosophy that aligns more closely with your own method of investing. This can lead to peace of mind when choosing a third party to be the steward of your hard-earned nest egg. Robo-advisors lower the barriers to entry that existed in financial markets, much like online trading platforms opened up markets for part-time trading. As with part-time trading, this is not a one-fits-all solution, but another tool for investors to consider. As someone who watches the development of the ETF market for a living, I see robo-advisors as another gateway for exposing a new generation of investors to ETFs, significantly strengthening ETFs’ position as the fund vehicle of choice in the market. Stay tuned for part 3 next week, which will focus on the ETF fee war and concluding thoughts for the ETF industry trends in 2016.