I generally do not have an issue with ETFs as an investment option.\nThey can offer investors low-cost access to a diversified portfolio of assets,\nwhich is especially useful for someone just starting out. ETFs make less sense\nwith higher net worth investors, in my view, because owning the index means\ntaking the good with the bad, instead of using empirical research and a\ndisciplined investment process to choose individual stocks that address your\ngrowth, risk, and tax objectives.<\/p>\n\n\n\n
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Base Your Investing Decisions on Fundamentals and Hard Data!<\/a><\/strong><\/p>\n\n\n\n While exploring\ndifferent investing options, I want to remind you about the importance of\nkeeping an eye on economic indicators as opposed to timing the market. This may\nbe difficult to do especially in times like these, but that\u2019s where we can\nhelp!<\/p>\n\n\n\n In our just-released Stock Market Outlook report, we provide\ninsight on how to focus on the facts and hard data. This report contains some\nof our key forecasts to consider such as:<\/p>\n\n\n\n If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!\u00a0 __________________________________________________________________________<\/p>\n\n\n\n In the small-cap world, however, I see a problem with ETFs in\n2021 no matter what type of investor you are. The problem: \u201cmeme stocks.\u201d<\/p>\n\n\n\n As it relates to small-cap value as a category, AMC and\nGameStop have been the two biggest contributors to performance for the year,\nwhich has also vaulted them into outsized holdings in ETFs. In the iShares\nRussell 2000 Value ETF and the Vanguard Russell 2000 Value ETF, for example,\nAMC is the biggest holding. The company\u2019s outrageous $22 billion market cap \u2013 which\nhas been driven in large part by online fame and social media postings \u2013 makes\nit 14 times larger than the ETF\u2019s average holding. That\u2019s troublesome.<\/p>\n\n\n\n AMC\u2019s fundamentals are murky at best, and the stock is\ntrading at a very high multiple. Many investors may think twice about buying\nit, and that\u2019s where owning a small-cap value ETF could be problematic \u2013 it\nmeans having AMC as a top holding. GameStop was dropped from the Russell 2000\nvalue index in June, but it is also a stock many investors may not want as a\nprimary holding in an ETF. These types of scenarios expose issues with the passive\nindex ETF approach. Sometimes you end up owning stocks you don\u2019t want. <\/p>\n\n\n\n I\u2019m not making the case for or against GameStop and AMC. They\njust do not currently meet the research-driven, fundamental criteria we use to\ninform our decision-making at Zacks Investment Management. We start with the\nentire universe of small-cap names (which includes growth and value stocks),\nrun each company through a proprietary quantitative screen, weigh the\nrisk-adjusted return potential, and then monitor the top 100 or so stocks\nregularly to ensure they keep meeting our criteria. We do not choose stocks based\non online trends or viral videos, and stocks with declining fundamentals are\npromptly sold. <\/p>\n\n\n\n As of the end of Q2 2021, the Zacks Small-Cap Equity strategy has yielded a portfolio with lower risk than the Russell 2000 Index (as measured by beta and standard deviation, the table below), and lower price to earnings and price to book ratios. In our view, we\u2019ve constructed a portfolio with lower risk and better value than the index, which we believe can deliver better risk-adjusted returns to investors. <\/p>\n\n\n\n Bottom Line for\nInvestors <\/strong><\/p>\n\n\n\n As I mentioned in this column, I do not take issue with ETFs\nin general. They can be useful for many types of investors to gain diversified\nexposure to an investment category \u2013 like small-cap stocks \u2013 at a low cost. <\/p>\n\n\n\n But it\u2019s important to understand the rules and guidelines informing\nhow an ETF is constructed, which could ultimately mean you end up owning stocks\nwith poor fundamentals. Investors who are truly value-oriented and focused on\nfundamentals would not be satisfied with that outcome. An actively managed\napproach, like we have with the Zacks Small-Cap Equity Strategy, means taking\ngreater care to know exactly what is in your portfolio, and what isn\u2019t.<\/p>\n\n\n\n We also provide insight into other ways on how to stay focused on long-term financial success. That includes keeping an eye on economic indicators and hard data that can positively impact your investments. Our <\/a>Just-Released October 2021 Stock Market Outlook Report<\/a>4<\/sup>,<\/strong> will help you do this! If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today! ETFs can offer investors low-cost diversification, but it’s important to understand how index ETFs are constructed <\/p>\n","protected":false},"author":3,"featured_media":8874,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-9867","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9867","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=9867"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9867\/revisions"}],"predecessor-version":[{"id":10303,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9867\/revisions\/10303"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=9867"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=9867"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=9867"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
IT\u2019S FREE.\u00a0<\/strong>Download the Just-Released October 2021 Stock Market Outlook<\/strong><\/a>2<\/sup><\/strong><\/p>\n\n\n\n![\"\"](\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/1_pic1-6.png\")
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This report is packed with newly revised predictions that can help you base your next investment move on hard data. For example, you’ll discover Zacks\u2019 view on:<\/p>\n\n\n\n
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