The Sapient Investor

A recent article showed that among 7 major “smart beta” factors, momentum was the one with the highest risk-adjusted return in recent years. The ETF (exchange-traded fund) used to represent the momentum factor was iShares Edge MSCI USA Momentum Factor ETF (MTUM). Because of its low costs and tax efficiency, it is a very attractive way to invest in the momentum factor over the long-term. Currently, MTUM has characteristics, especially very strong upward revisions of EPS forecasts of its constituent stocks, that make now a particularly good time to initiate a position.

An earlier article discussed the basic considerations for investors contemplating an investment in municipal bond funds. National Muni Bond ETFs provide a low-cost and simple way to invest. However, municipal bond closed-end funds (CEFs) are sometimes a more attractive way to invest in the space when they are trading at an unusually large discount to the net asset values of their portfolios. Written specifically for Pennsylvania taxpayers, this article compares what we consider to be the most attractive Pennsylvania municipal bond mutual funds and CEFs to national ETFs and CEFs.

An earlier article discussed the basic considerations for investors contemplating an investment in municipal bond funds. National Muni Bond ETFs provide a low-cost and simple way to invest. However, municipal bond closed-end funds (CEFs) are sometimes a more attractive way to invest in the space when they are trading at an unusually large discount to the net asset values of their portfolios. Written specifically for New Jersey taxpayers, this article compares what we consider to be the most attractive New Jersey municipal bond mutual funds and CEFs to national ETFs and CEFs.

Several characteristics have provided consistent risk-adjusted excess return for country ETFs, including value-, momentum-, quality-, and sentiment-related factors. This article highlights a country ETF that is currently very attractive using an ETF selection model based upon such factors: iShares MSCI Sweden ETF (EWD).

There are many “smart beta” ETFs that claim to offer market-beating return potential. These funds are based upon academic research regarding characteristics or “factors” that have historically produced risk-adjusted excess return. Which ones should you use? And as important, when should you use them? This article seeks to help answer these important questions.

Does your wealth manager measure up? That is “the right question” according to the CFA Institute. But most people don’t even know that “CFA” stands for “Chartered Financial Analyst.” And they have no idea what that designation means or how a CFA Charterholder might stand out from among wealth managers with other credentials. This article will lay out why the CFA charter is widely considered the “gold standard” in the investments industry.

Several characteristics have provided consistent risk-adjusted excess return for sector and industry ETFs, including value-, momentum-, quality-, and sentiment-related factors. This article highlights an industry ETF that is currently very attractive using an ETF selection model based upon such factors: VanEck Vectors Semiconductor ETF (SMH).

Keynes was a very successful investor as well as a renowned economist. Much of his success can be attributed to his willingness to depart from conventional wisdom even in the face of intense criticism and the risk of failure. Investors can learn something from him.

Many ETFs offer “liquid alternatives” of various kinds, but very few have provided meaningful returns that are uncorrelated with the stock market, which is the whole point of investing in alternatives. IQ Merger Arbitrage Index ETF (MNA) is an exception. MNA offers investors a relatively low-cost passively-managed fund that systematically harvests the merger arbitrage risk premium. The fund has had a low correlation with the S&P 500, low volatility, and an impressive return history. It was just named “Alternative ETF of the Year” at the 2019 Mutual Fund and ETF Industry Awards.

Many investors try to fill in all nine of the “style boxes:” growth, core, and value along the style axis; large, mid, and small along the size axis. Unfortunately, all nine boxes have a very high correlation to each other. Their shared U.S. stock market risk means that they will all fall together. To obtain meaningful diversification requires allocating to equity asset classes with much lower correlations to U.S. stocks, including real estate and international stocks.