Self Directed Investor Inc
SDI: "Empowering investors with ideas and education"
Symbol Lookup »  
Topics:ChinaETFsEarningsEconomyEnergyForexGoldIncomeLessonsIdeasTrading

  • Other news: News from PR Newswire
| More

Advisor Insights: Embracing ETF Flexibility

Thu, Nov 1, 9:15 AM ET, by Michael Johnston

ETFs continue to find their way into countless portfolios as investors of all walks and styles have embraced these financial building blocks as part of their long-term strategy. Although many professional money managers have been hesitant to jump into the exchange-traded universe, those that have made the switch continue to reap the benefits offered through these innovative investment vehicles. J.J. Schenkelberg, CFA and Senior Portfolio Manager at CLS Investments, recently took time to share her experience with ETFs and also offer insights as to how her firm has been able to successfully utilize the growing lineup of funds [see How To Pick The Right ETF Every Time].

ETF Database (ETFdb): How long have you been using ETFs for? Do you see this product structure as the preferred means for building diversified, low-cost, long-term portfolios?

J.J. Schenkelberg (JJ): CLS Investments, LLC has a composite track record with ETF separate account portfolios dating back to April 2001. Prior to that time, CLS explored the use of ETFs within our family of proprietary mutual funds, which are structured as funds of funds. We are one of the longest-term users of ETFs and listed in the top 10 users of ETFs according to BlackRock/iShares. Our proprietary mutual funds were originally structured as funds of actively managed mutual funds, since our portfolio managers identified that CLS's primary expertise was in the allocation of the overall portfolio and choosing what part of the investment universe to underweight or overweight.

In other words, the portfolio managers found they could bring more value to the portfolio by choosing to own small cap equities rather than choosing specifically which small cap equity manager to use. As our funds grew, it also became more difficult to actively trade the active fund managers. ETFs were a natural solution versus actively managed mutual funds because they offer lower cost, flexible market exposure that is not subject to style drift. As the ETF industry grew, we found more opportunities to utilize ETFs for total market exposure and build separate account portfolios. We certainly believe this product structure is the preferred means for building diversified, low-cost, long-term portfolios.

ETFdb: Why do you think many financial advisors have generally been slow to embrace ETFs in their practice?

JJ: I believe product understanding and reluctance to embrace innovative products has caused advisors to embrace ETFs at a slow pace. Change is always difficult for any industry. Skepticism regarding a different product structure is always high due to the financial regulatory environment. As more advisors have seen their peers begin to fully research and utilize ETFs within their practice, they have become more comfortable. The ETF process can seem complex to many advisors and it takes time to fully understand the nature of ETFs.

ETFdb: Aside from the well-known benefits offered through the ETF wrapper, what do you personally embrace about this product structure?

JJ: I personally embrace the trading flexibility, market transparency, and tax efficiency of ETFs. The ability to research market trends and identify a specific vehicle to gain access to an attractive trend is key to building efficient and effective portfolios. Tax efficiency is becoming a larger concern for many clients, and we find ETFs provide a natural fit for this type of client.

ETFdb: Are there asset classes where you're more comfortable using ETFs and others where you prefer mutual funds or other vehicles?

JJ: We try to primarily utilize ETFs that provide broad access to the market, sectors, and countries. There are very few places in the market that do not offer exposure through ETFs.

[For more ETF analysis, make sure to sign up for our free ETF newsletter or try a free seven day trial to ETFdb Pro]

ETFdb: What do you expect in terms of ETF adoption going forward? What types of investors have been slow to adopt or are potentially major beneficiaries of embracing ETFs?

JJ: It seems major investment advisors are beginning to embrace ETFs more widely for seemingly efficient areas of the market, such as large cap U.S. stocks and broad global offerings. Clients have also begun to demand more flexibility in their portfolio holdings over the past few years. Buy and hold investing seems to have somewhat lost its luster. As clients push for more flexible portfolios, I believe advisors will further embrace ETFs. That said, tax conscious investors are potentially the major beneficiaries of embracing ETFs. The greater tax control that comes from measuring capital gains based off the client's holding period rather than a mutual fund's, as well as the ability to avoid the mandatory distributions that come each year from mutual funds, can be very attractive for a client concerned about taxes.

ETFdb: How are your strategies evolving in the low rate environment? What techniques are you using to deliver current income to your clients?

JJ: In January 2012, CLS launched a diversified income based strategy called Managed Income. This strategy is ETF-based, with exposure to a broad set of income-producing assets, including but not limited to: government bonds, corporate bonds, high yield bonds, preferred stocks, dividend-focused stocks, and real estate. The strategy may be implemented for the client at different risk levels based on their ability and willingness to accept market volatility. The utilization of ETFs gives CLS the ability to offer a flexible portfolio approach where trades can be placed to overweight certain income-producing assets that offer value and underweight others that do not. This diversified approach allows the client to avoid unnecessary concentration in one particular type of income-producing asset. In addition, the portfolio allows an inclusive bucket approach that allows the client to manage their distribution flows at a rate that is comfortable for them.

Bottom Line: In addition to the ease-of-use, transparency, and intraday liquidity benefits associated with the exchange-traded product structure, the tax-efficiency trait is a major advantage for self-directed and professional portfolio managers alike. The cost-efficient nature of ETFs and their ability to offer greater tax control makes these vehicles ideal for anyone looking to execute a long-term strategy.

Follow me on Twitter @SBojinov

Disclosure: No positions at time of writing.

 

Click here to read the original article on ETFdb.com.


SDI Glossary: "ETFs" Definition
SDI Glossary: "iShares" Definition
This Article's Word Cloud:   ETFdb   ETFs   What   ability   actively   advisors   also   approach   based   been   believe   building   client   cost   diversified   embrace   exposure   flexible   funds   have   income   investment   investors   long   major   managers   many   market   more   mutual   offer   portfolio   portfolios   producing   product   slow   stocks   strategy   structure   term   that   their   these   they   this   time   using   utilize   where   with

| More

XLB Crosses Above Key Moving Average Level
Fri, Oct 31, 3:54 PM ET, by ETF Channel

In trading on Friday, shares of the Materials Select Sector SPDR Fund ETF (XLB) crossed ...

SPDR Global Dow (DGT) Shares Cross Above 200 DMA
Fri, Oct 31, 3:54 PM ET, by ETF Channel

In trading on Friday, shares of the SPDR Global Dow ETF (DGT) crossed above their ...

Cimarex Energy Achieves #93 Analyst Rank, Surpassing PepsiCo
Fri, Oct 31, 12:24 PM ET, by ETF Channel

In a study of analyst recommendations at the major brokerages, for the underlying components of ...

DFJ Makes Bullish Cross Above Critical Moving Average
Fri, Oct 31, 11:44 AM ET, by ETF Channel

In trading on Friday, shares of the Japan SmallCap Dividend ETF (DFJ) crossed above their ...

EFAV Crosses Above Key Moving Average Level
Fri, Oct 31, 11:44 AM ET, by ETF Channel

In trading on Friday, shares of the iShares MSCI EAFE Minimum Volatility ETF (EFAV) crossed ...

EXI Crosses Above Key Moving Average Level
Fri, Oct 31, 11:44 AM ET, by ETF Channel

In trading on Friday, shares of the iShares Global Industrials ETF (EXI) crossed above their ...

PHO Crosses Above Key Moving Average Level
Fri, Oct 31, 11:44 AM ET, by ETF Channel

In trading on Friday, shares of the PowerShares Water Resources Portfolio ETF (PHO) crossed above ...

TZA: Large Inflows Detected at ETF
Fri, Oct 31, 11:34 AM ET, by ETF Channel

Symbols mentioned in this story: TZA Exchange traded funds (ETFs) trade just like stocks, but ...

FXR, ALK, VEC, UAL: ETF Outflow Alert
Fri, Oct 31, 11:34 AM ET, by ETF Channel

Symbols mentioned in this story: FXR, ALK, VEC, UAL Exchange traded funds (ETFs) trade just ...

EIDO: Large Inflows Detected at ETF
Fri, Oct 31, 11:24 AM ET, by ETF Channel

Symbols mentioned in this story: EIDO Exchange traded funds (ETFs) trade just like stocks, but ...

Shares of FXY Now Oversold
Fri, Oct 31, 11:14 AM ET, by ETF Channel

In trading on Friday, shares of the Japanese Yen Trust ETF (FXY) entered into oversold ...

EWV Crosses Critical Technical Indicator
Fri, Oct 31, 11:14 AM ET, by ETF Channel

In trading on Friday, shares of the Proshares UltraShort MSCI Japan ETF (EWV) entered into ...

iShares MSCI Japan Small-Cap (SCJ) Shares Cross Above 200 DMA
Fri, Oct 31, 11:14 AM ET, by ETF Channel

In trading on Friday, shares of the iShares MSCI Japan Small-Cap ETF (SCJ) crossed above ...

Permanent Breaks Below 200-Day Moving Average - Notable for PERM
Fri, Oct 31, 11:14 AM ET, by ETF Channel

In trading on Friday, shares of the Permanent ETF (PERM) crossed below their 200 day ...

PowerShares DB Gold Fund (DGL) Enters Oversold Territory
Fri, Oct 31, 11:14 AM ET, by ETF Channel

In trading on Friday, shares of the PowerShares DB Gold Fund ETF (DGL) entered into ...

KBE Makes Bullish Cross Above Critical Moving Average
Thu, Oct 30, 4:14 PM ET, by ETF Channel

In trading on Thursday, shares of the SPDR S&P Bank ETF (KBE) crossed above their ...

EEB Makes Bullish Cross Above Critical Moving Average
Thu, Oct 30, 4:14 PM ET, by ETF Channel

In trading on Thursday, shares of the Guggenheim BRIC ETF (EEB) crossed above their 200 ...

Bank and Brokerage (RKH) Shares Cross Above 200 DMA
Thu, Oct 30, 3:54 PM ET, by ETF Channel

In trading on Thursday, shares of the Bank and Brokerage ETF (RKH) crossed above their ...

Shares of SRS Now Oversold
Thu, Oct 30, 3:54 PM ET, by ETF Channel

In trading on Thursday, shares of the Proshares UltraShort Real Estate ETF (SRS) entered into ...

SLVP Crosses Critical Technical Indicator
Thu, Oct 30, 3:54 PM ET, by ETF Channel

In trading on Thursday, shares of the iShares MSCI Global Silver Miners ETF (SLVP) entered ...

IEMG Makes Bullish Cross Above Critical Moving Average
Thu, Oct 30, 3:54 PM ET, by ETF Channel

In trading on Thursday, shares of the iShares Core MSCI Emerging Markets ETF (IEMG) crossed ...

GDXJ Crowded With Sellers
Thu, Oct 30, 11:54 AM ET, by ETF Channel

In trading on Thursday, shares of the Junior Gold Miners ETF (GDXJ) entered into oversold ...

GDX Crosses Critical Technical Indicator
Thu, Oct 30, 11:54 AM ET, by ETF Channel

In trading on Thursday, shares of the Gold Miners ETF (GDX) entered into oversold territory, ...

EPU Crosses Critical Technical Indicator
Thu, Oct 30, 11:54 AM ET, by ETF Channel

In trading on Thursday, shares of the iShares MSCI All Peru Capped ETF (EPU) entered ...

ETFS Physical Silver Shares (SIVR) Enters Oversold Territory
Thu, Oct 30, 11:54 AM ET, by ETF Channel

In trading on Thursday, shares of the ETFS Physical Silver Shares ETF (SIVR) entered into ...

VXF, TWTR, AAL, TSLA: ETF Inflow Alert
Thu, Oct 30, 11:34 AM ET, by ETF Channel

Symbols mentioned in this story: VXF, TWTR, AAL, TSLA Exchange traded funds (ETFs) trade just ...

Consumer Discretionary Select Sector SPDR Fund Experiences Big Inflow
Thu, Oct 30, 11:34 AM ET, by ETF Channel

Symbols mentioned in this story: XLY, DIS, AMZN, MCD Exchange traded funds (ETFs) trade just ...

IWO, PBYI, TMH, ISIS: ETF Inflow Alert
Thu, Oct 30, 11:34 AM ET, by ETF Channel

Symbols mentioned in this story: IWO, PBYI, TMH, ISIS Exchange traded funds (ETFs) trade just ...

Energy Select Sector SPDR Fund Experiences Big Outflow
Thu, Oct 30, 11:34 AM ET, by ETF Channel

Symbols mentioned in this story: XLE, CVX, EOG, OXY Exchange traded funds (ETFs) trade just ...

IVV, AAPL, XOM, MSFT: ETF Inflow Alert
Thu, Oct 30, 11:34 AM ET, by ETF Channel

Symbols mentioned in this story: IVV, AAPL, XOM, MSFT Exchange traded funds (ETFs) trade just ...

IVW, JNJ, SLB, GOOGL: ETF Inflow Alert
Thu, Oct 30, 11:34 AM ET, by ETF Channel

Symbols mentioned in this story: IVW, JNJ, SLB, GOOGL Exchange traded funds (ETFs) trade just ...

SHY: Large Outflows Detected at ETF
Thu, Oct 30, 11:34 AM ET, by ETF Channel

Symbols mentioned in this story: SHY Exchange traded funds (ETFs) trade just like stocks, but ...

Shares of DBP Now Oversold
Thu, Oct 30, 11:14 AM ET, by ETF Channel

In trading on Thursday, shares of the PowerShares DB Precious Metals Fund ETF (DBP) entered ...

Gold Explorers Getting Very Oversold
Thu, Oct 30, 11:14 AM ET, by ETF Channel

In trading on Thursday, shares of the Gold Explorers ETF (GLDX) entered into oversold territory, ...

BKF Makes Bullish Cross Above Critical Moving Average
Thu, Oct 30, 10:54 AM ET, by ETF Channel

In trading on Thursday, shares of the iShares MSCI BRIC ETF (BKF) crossed above their ...

SPDR S&P Telecom (XTL) Shares Cross Above 200 DMA
Thu, Oct 30, 10:54 AM ET, by ETF Channel

In trading on Thursday, shares of the SPDR S&P Telecom ETF (XTL) crossed above their ...

16.8% of XOP Holdings Seeing Recent Insider Buys
Thu, Oct 30, 10:14 AM ET, by ETF Channel

A look at the weighted underlying holdings of the SPDR S&P Oil & Gas Exploration ...

PX Named Top 25 SAFE Dividend Stock Increasing Payments For Decades
Thu, Oct 30, 9:24 AM ET, by ETF Channel

Praxair, Inc. (PX) has been named to the Dividend Channel ''S.A.F.E. ...

iShares Emerging Markets Infrastructure (EMIF) Shares Cross Above 200 DMA
Wed, Oct 29, 4:14 PM ET, by ETF Channel

In trading on Wednesday, shares of the iShares Emerging Markets Infrastructure ETF (EMIF) crossed above ...

CSJ Makes Notable Cross Below Critical Moving Average
Wed, Oct 29, 4:14 PM ET, by ETF Channel

In trading on Wednesday, shares of the iShares 1-3 Year Credit Bond ETF (CSJ) crossed ...

AIA Crosses Above Key Moving Average Level
Wed, Oct 29, 4:14 PM ET, by ETF Channel

In trading on Wednesday, shares of the iShares Asia 50 ETF (AIA) crossed above their ...

Daily Junior Gold Miners Index Bull 3x Shares (JNUG) Enters Oversold Territory
Wed, Oct 29, 4:14 PM ET, by ETF Channel

In trading on Wednesday, shares of the Daily Junior Gold Miners Index Bull 3x Shares ...

RING Crowded With Sellers
Wed, Oct 29, 4:14 PM ET, by ETF Channel

In trading on Wednesday, shares of the iShares MSCI Global Gold Miners ETF (RING) entered ...

SPDR S&P Regional Banking (KRE) Shares Cross Above 200 DMA
Wed, Oct 29, 4:14 PM ET, by ETF Channel

In trading on Wednesday, shares of the SPDR S&P Regional Banking ETF (KRE) crossed above ...

PRFZ Crosses Above Key Moving Average Level
Wed, Oct 29, 11:14 AM ET, by ETF Channel

In trading on Wednesday, shares of the PowerShares FTSE RAFI US 1500 Small-Mid Portfolio ETF ...

EMHY Crosses Above Key Moving Average Level
Wed, Oct 29, 11:14 AM ET, by ETF Channel

In trading on Wednesday, shares of the iShares Emerging Markets High Yield Bond ETF (EMHY) ...

PSCI Crosses Above Key Moving Average Level
Wed, Oct 29, 11:14 AM ET, by ETF Channel

In trading on Wednesday, shares of the PowerShares S&P SmallCap Industrials Portfolio ETF (PSCI) crossed ...

EGShares Emerging Markets Consumer (ECON) Shares Cross Above 200 DMA
Wed, Oct 29, 11:14 AM ET, by ETF Channel

In trading on Wednesday, shares of the EGShares Emerging Markets Consumer ETF (ECON) crossed above ...

PowerShares KBW Regional Bank Portfolio Breaks Above 200-Day Moving Average - Bullish for KBWR
Wed, Oct 29, 11:14 AM ET, by ETF Channel

In trading on Wednesday, shares of the PowerShares KBW Regional Bank Portfolio ETF (KBWR) crossed ...

EWQ: ETF Inflow Alert
Wed, Oct 29, 10:54 AM ET, by ETF Channel

Symbols mentioned in this story: EWQ Exchange traded funds (ETFs) trade just like stocks, but ...

Related videos | all videos »
  More articles:  1 2 3 4 5 6 7 next »

ABOUT US »   ADVERTISE »   CONTACT US »   TERMS OF USE & PRIVACY POLICY »

Advisor Insights: Embracing ETF Flexibility | Self Directed Investor | Copyright © 2008 - 2014, All Rights Reserved

Any ideas and opinions presented in Self Directed Investor content are for informational and educational purposes only, and do not reflect the opinions of BNK Invest, Inc. or any of its affiliates, subsidiaries or partners. In no way should any content contained herein be interpreted to represent trading or investment advice. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. All site visitors agree that under no circumstances will BNK Invest, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held liable for any loss or damage caused by your reliance on information obtained. Read Full Disclaimer.

SDI is associated with: ValueForum.com -- a subscription-based online social networking forum of over 1000 individual investors. | MarketNewsVideo.com -- videos appearing on SDI are produced by Market News Video. | TickerTech.com -- stock quote content appearing on SDI is at least 20 minutes delayed and is powered by Ticker Technologies. | GoldStockStrategist.com -- Edited by Scott V. Nystrom, PhD, Gold Stock Strategist provides analysis on gold mining companies.