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4 ETFs You Can Hold Forever

Summary The trend of money flowing towards robo-advisers and passive asset allocators is one that is likely to continue in the current market environment. ETFs offer real diversification, low cost, and a global reach for those that want to buy and hold for the long-term. Several funds on this list offer a compelling value proposition when composing your asset allocation strategy. The trend of money flowing towards robo-advisers and passive asset allocators is one that is likely to continue in the current market environment. Amid the more recent back drop of low volatility capital appreciation in stocks and bonds, it seems that the natural evolution is to put your portfolio on auto-pilot or give it to someone who is just going to rebalance it quarterly. That’s not necessarily my philosophy on investing , but I understand that some people want to stay fully invested at all times or use continual dollar cost averaging to their advantage. In order to do so, you may find yourself searching for the “perfect investment” or asset allocation to hold for the long-term. Instead of paying someone to do that for you, I recommend taking a simpler approach that incorporates multiple asset classes through a flexible investment vehicle. A favorite individual stock such as Apple Inc (NASDAQ: AAPL ) might be suitable for some investors. However, if you want real diversification, low cost, and a global reach, I would consider using an exchange-traded fund instead. The following funds represent excellent opportunities for long-term investors. Vanguard Total Stock Market ETF (NYSEARCA: VTI ) You can’t go wrong with VTI for complete coverage of the U.S. stock market across multiple styles and market caps. This ETF charges a rock bottom expense ratio of just 0.05% for access to 3,800 U.S.-based publicly traded companies that include large, mid, and small-cap segments. While that level of diversification may seem overly broad to some investors, it is perfect for those who are looking for a core position in a small account or to simplify many overlapping funds down to a single entity. VTI has over $50 billion in total assets and a current 30-day SEC yield of 1.88%. The best thing I can say about this ETF is that it is low cost, extremely liquid, and will provide a passive vehicle for tracking the entire U.S. stock market. In addition, it has very little turnover to minimize tax implications for investors that wish to hold this fund in a long-term taxable account. Vanguard Total International Stock ETF (NASDAQ: VXUS ) Often times I see investors trying to get cute with their international exposure to overweighting certain areas of the globe in order to try and capture the best performers. However, if I was to pick just one ETF to bet on the entire market outside of the U.S., it would be VXUS. This ETF contains over 5,800 securities of both developed and emerging market nations around the world. That includes everything from Canada to China and everywhere in between. VXUS also follows a passive index approach similar to VTI with a minimal expense ratio of just 0.14%. Pairing an international fund such as VXUS with VTI can provide you with full coverage of global stocks in just two positions that are easy to track over time. If you wanted to pair that down to just one vehicle you could always select the Vanguard Total World Stock ETF (NYSEARCA: VT ) as well. PIMCO Total Return ETF (NYSEARCA: BOND ) Picking a single bond fund to pair with my stock exposure is not an easy task considering the challenges facing fixed-income over the next several years. Ultra low yields around the globe have made the way forward a potentially treacherous one given the expectation of interest rate cycles changing over time. Despite the turmoil associated with its portfolio manager leaving last year, I would be inclined to incorporate BOND in my portfolio as a solid long-term holding. The reason I selected BOND has to do with a number of complex factors that include the fact it is one of the only truly global broad-market offerings in the ETF space with sufficient size and history. The newly established Fidelity Total Bond ETF (NYSEARCA: FBND ) may be a suitable alternative. However, I don’t believe that Fidelity has the same level of sophistication when it comes to fixed-income research and security selection as compared to PIMCO. In addition, I like the active style of the BOND portfolio that gives the manager flexibility to target specific duration, credit quality, country, and sector exposure. I truly believe that these factors are important when competing with passive “total bond market” indexes from the approach of managing risk to enhance returns . Cambria Global Asset Allocation ETF (NYSEARCA: GAA ) If you are looking for the structure of a global multi-asset index that takes care of rebalancing your asset allocation, GAA should certainly be on your radar. This “fund of funds” is the first ETF of its kind to offer exposure to stocks, bonds, real estate, and commodities with zero expense ratio. While there are still minimal “acquired fund expenses” to own the 28 underlying ETFs, GAA is focused on low-cost indexes to achieve its goals. The current asset allocation of GAA is 51% bonds, 43% stocks, and 7% commodities. The majority of the underlying holdings are Vanguard, iShares, State Street, and Market Vectors products. The benefit to GAA is that their model is created using not just a market cap weighted methodology, but also incorporating value and momentum as well. The ultra-low fees to own this fund combined with the added bonus of automatic rebalancing make this an attractive position for moderate or conservative investors looking for a long-term core holding. Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article. Additional disclosure: David Fabian, FMD Capital Management, and/or clients may hold positions in the ETFs and mutual funds mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell, or hold securities.

ETFs To Hideout In While New Trends Take Shape

Summary Uncertainty in the markets can be a scary thing and often prompt ill-timed moves that set your portfolio back from achieving your goals. The unknown is how long will it take for new opportunities to develop and where the most rewarding setups may ultimately materialize. You may be better off seeking out conservative strategies that give you some measure of correlation to stock or bonds. Uncertainty in the markets can be a scary thing and often prompt ill-timed moves that set your portfolio back from achieving your goals. The initial days of trading in 2015 have certainly shown an increase in volatility that may prove to setup new trends in the near future. The SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) is more than 4% off its all-time highs and initiating the worst start to a New Year since 2008. The unknown is how long will it take for new opportunities to develop and where the most rewarding setups may ultimately materialize. Patience and discipline may be your best allies when stalking new trends. Instead of just languishing in cash that is paying nothing, you may be better off seeking out conservative strategies that give you some measure of correlation to stock or bonds. These short-term holdings using diversified ETFs that will give you the opportunity for some income , capital appreciation, or both. Short Term Bonds Investors that favor short-term bond ETFs as temporary hideouts may want to check out the iShares 1-3 Year Credit Bond ETF (NYSEARCA: CSJ ) or the Vanguard Short-Term Bond ETF (NYSEARCA: BSV ). CSJ is made up of over 900 investment grade credit securities from both domestic and foreign issuers with an effective duration of less than 2 years. The fund has a yield of approximately 1% and charges an expense ratio of just 0.20%. In addition, the net asset value has been very stable over the last several years. BSV has a similar yield with more government related fixed-income and a slightly higher duration as well. Depending on your broker, you may be able to purchase one or both of these ETFs commission-free in order to be able to trade in or out when needed without eating into income or principal. Asset Allocation Funds If you are looking for a fund that is designed to take less risk than the overall market, you may want to consider an asset allocation fund such as the iShares Conservative Allocation ETF (NYSEARCA: AOK ). This ETF takes a “fund of funds” approach to allocate among stocks, bonds, and cash with the goal being low volatility. AOK is primarily weighted towards investment grade bonds with some select domestic and foreign equities. This provides conservative market correlation with a decent 2% yield. Income is paid on a monthly basis, which is an attractive quality as well. Another new entrant in the asset allocation space with more international exposure is the Cambria Global Asset Allocation ETF (NYSEARCA: GAA ). This ETF is unique in that it takes wider exposure to global asset classes and doesn’t charge an overriding management fee. The fund is currently weighted with 50% bond exposure, 43% stocks, and 7% commodities. GAA can provide heavy diversification in a single low-cost investment vehicle . What’s not to like? The Bottom Line Implementing a plan to navigate a market crossroads, while avoiding too much risk, can be a prudent portfolio management technique for most investors. Having too much cash for long periods of time can breed indecision and lead to a state of paralysis. With these ETFs you can still enjoy some participation in market dynamics with less overall exposure to draw down than a traditional equity or bond fund. They can ultimately be a stepping stone to a more conventional trend or strategy when conditions prove to be more favorable. Additional disclosure: David Fabian, FMD Capital Management, and/or clients may hold positions in the ETFs and mutual funds mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell, or hold securities.

Competition Heats Up In The Global Tactical ETF Space

With the launch of the Cambria Global Asset Allocation ETF (NYSEARCA: GAA ), Cambria Funds looks to compete with the AdvisorShares ETF that Cambria previously managed; and with the new zero-management fee alternative mutual fund offered by Aspiration Funds. The Cambria Global Asset Allocation ETF debuted on December 9. The ETF’s objective is to replicate the results of the Cambria Global Asset Allocation Index, which allocates assets across asset classes in pursuit of absolute positive returns. Investing in the new ETF will provide investors with exposure to stocks, bonds, commodities, and currencies, diversified across geographic markets and economic sectors. While Aspiration Funds made headlines with their innovative “name your own price” management fees, the new alternative ETF from Cambria Funds goes even further, with a flat management fee of 0.00% (that’s not a typo). Being an ETF, the new Cambria fund doesn’t charge a 12b-1 fee, either, and its net-expense ratio is just 0.29%. The only catch to the ultra-low fees is that the new ETF invests in other ETFs, some of which are managed by Cambria, and the underlying ETF managers will collect management fees. The Cambria Global Asset Allocation ETF typically invests in other ETPs (exchange-traded products), with roughly 40% of its assets allocated to equities, 40% to fixed-income, and 20% to other asset classes such as commodities and currencies. The goal is to gain diversification benefits through asset allocation, in order to dampen volatility, limit drawdowns, and keep investors in the market, long-term, so that their gains can compound. Cambria Investment Management serves as the new ETF’s investment advisor, and its portfolio managers are Mebane Faber and Eric Richardson. Previously, Cambria managed a similar ETF for AdvisorShares, now known as the AdvisorShares Morgan Creek Global Tactical ETF (NYSEARCA: GTAA ) and managed by Mark Yusko of Morgan Creek Capital. Through December 22, GTAA had gained 4.6% in 2014, but its net-expense ratio of 1.63% is 134 basis points higher than GAA’s. 2015 is shaping up to be a big one for liquid alts, and the competition between these ETFs likely foreshadows many similar showdowns to come. Liquid alts investors, who gain additional investment options and benefit from the downward pressure on fees, have reason to look forward to the New Year. For more information, visit the new fund’s website .