The ETF I Always Own

Advisors tell us their favorite go-to picks for client portfolios.

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Reviewed by: Lara Crigger
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Edited by: Lara Crigger

[This article appears in our September 2020 issue of ETF Report.]

 

ETF selection is a lot like going to your favorite res¬taurant. (Remember those?) There might be dozens of appetizing entrees on the menu, but most folks will usually just order the same thing, over and over. Why mess with what works, right?

So it goes with constructing ETF portfolios. While there may be more than 2,300 ETFs currently on the market, most advisors typically come back again and again to at least some of the same names.

Recently, we polled advisors big and small about some of their favorite tried-and-true ETFs. The diversity of their responses proves that whether it’s a diversified basket of stocks that captures an entire market in one go, or an alternatives fund that offers just the right take, there’s no right or wrong answer when it comes to an ETF you can trust.


Shana Sissel
Chief Investment Officer
Spotlight Asset Group

AGFiQ U.S. Market Neutral Anti-Beta Fund (BTAL)

BTAL is my favorite ETF; I talk about it all the time. It’s an alternatives ETF that goes long stocks with the lowest beta, and shorts stocks with the highest beta. And it’s done remarkably well, even in up and down markets, because it’s basically low vol on steroids. As long as low volatility is working, BTAL does exceptionally well.

It isn’t necessarily negatively correlated, however. [On July 28, 2020] BTAL is up 32 basis points, while the market is down four. But [on July, 2020], when the market was up, BTAL was also up. So it’s really more like a play on low vol. And it’s a fantastic hedge to our portfolio. We use it in our alternatives sleeve to serve as a hedge, but we like it because it’s not perfectly negatively correlated.

When you look at when the market declined in March, BTAL was up a ton: 25%. As the market has run back up, it’s come back to earth quite a bit, but it’s still positive for the year by a large margin.

We use it in all our clients’ portfolios. We have a dedicated alts sleeve, which right now is about 15% in all our portfolios, and BTAL is about a 10% allocation, at best.

 


Ryan Frailich
Founder & Financial Planner
Deliberate Finances

iShares MSCI KLD 400 Social ETF (DSI)

DSI is a replacement fund for clients expressing interest in SRI [socially responsible investing], but who have relatively small account sizes, so full-blown custom portfolios aren’t attainable (yet).

The fund is very similar in terms of broad market exposure as the Vanguard Total Stock Market ETF (VTI), but with a tilt toward being ... somewhat more responsible.

I’m upfront with clients that they will likely still have some of their money in companies [that may not align with their values], but at least [DSI] is striving in the direction of a more positive impact on society by screening out companies with some of the worst behavior. For example, it leaves out Wells Fargo (WFC) [Editor’s Note: likely due to issues with its corporate governance], which is included in VTI.

DSI is far smaller than VTI, and costs a little more (0.25%), but it’s an option for those expressing an interest in SRI.

 


Marguerita Cheng
Chief Executive Officer
Blue Ocean Global Wealth

First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN)

[Our] clients may have “core” and “opportunity” portfolios. Other terminology might be “workhorse” versus “racehorse.” The “racehorse” portfolio can be more tactical, while the “workhorse” is more strategic, and the “racehorse” may be more volatile and have the opportunity to generate more alpha.

Some examples of “racehorse” ETFs I’ve used include cybersecurity, cloud computing and clean energy. I’ve used QCLN (First Trust NASDAQ Clean Edge Green Energy Index Fund); the First Trust EIP Carbon Impact ETF (ECLN) is another. We’ve used both. I certainly respect and honor the preferences of my clients. They drive hybrids and try to reduce their carbon footprint. They understand that green energy is a longer-term commitment. We don’t put all of their money there, though.

I love the racehorse/workhorse [analogy], because they are indeed different animals. This strategy allows clients to have their cake and eat it too. It can be vegan flourless chocolate cake. Now I’m hungry.

 


Anna N’Jie-Konte
Founder
Dare To Dream Financial Planning

Vanguard Total Stock Market ETF (VTI)

Most of my clients are just getting started in investing. In particular, they may have employer plans, like 401(k)s or 403(b)s. But in terms of setting up their own brokerage account or their own Roth IRA, this is usually their first go-round.

So for a person who’s really just getting started, I like to use VTI. It’s super simple, but it provides a lot of exposure in a low-maintenance way. When you have a client on the younger side just getting started [in building wealth], you want them to have a lot of market exposure. So I lean heavily toward diversified, stable funds—even if they can afford to take on more risk, I don’t want them to, not right out of the gate.

With VTI, they can get their small, medium and large cap exposure without having to do too much work to make sure it’s balanced and appropriate.

I’m a big Vanguard fan. I use a lot of the Vanguard lineup: VV [the Vanguard Large-Cap ETF], VOO [the Vanguard S&P 500 ETF], VTI—those are ones I use a lot, in all my portfolios. There’s an alignment with and a commitment to passive investing, and I feel very strongly that passive investing is the way to go, for about 90% of people. With Vanguard, I’m dealing with a firm that’s very committed to that.

 


Blair DuQuesnay
Investment Advisor & Financial Planner
Ritholtz Wealth Management

iShares Gold Trust (IAU)

Gold is nearing new all-time highs, and once again capturing the attention of investors, and IAU provides that access to physical gold bullion.

[I also like that] on the iShares website, you can pull the list of gold bars that are owned by the ETF trust and see which vaults they’re located in around the world.

 

Lara Crigger is a former staff writer for etf.com and ETF Report.