This article was originally published on ETFTrends.com.
As the U.S. bull market extends, exchange traded fund investors should consider alternative strategies that may limit risks while still participating on any further upside potential.
Marie Dzanis, Head of Intermediary Distribution and Wealth for Northern Trust Asset Management's FlexShares, pointed to ESG, fixed income, factor investing and behavioral finance as four areas that investors should be eyeing in 2018.
"The challenge is that it is very hard to get people to do things within their portfolios when you have a nine-year increase year-over-year positive market," Dzanis said at the Inside ETFs 2018 conference.
Many investors would look at traditional, passive index-based ETFs that provide broad market exposure as an investment that is good enough to capture the solid growth of benchmark indices like the S&P 500 or the Nasdaq.
However, the growing complacency may expose investors to increased risks in an aging bull market where some of their largest company exposures are also those that have strengthened the most and now look pricey during the ongoing rally.
Consequently, Dzanis pointed to factor-based ETFs with a disciplined rules-based approach to accessing the markets.
For example, the FlexShares Morningstar U.S. Market Factor Tilt Index Fund (TILT) tries to provides enhanced exposure to U.S. equities by tilting the portfolio toward long-term growth potential of small-cap and value stocks. Additionally, for international exposure, investors can look to the FlexShares Morningstar Developed Markets Ex-US Factor Tilt Index Fund (TLTD) and the FlexShares Morningstar Emerging Markets Factor Tilt Index Fund (TLTE) .
Furthermore, dividend ETF investors who are seeking stability, along with exposure to the growing U.S. markets, can look to the FlexShares Quality Dividend Index Fund (QDF) , FlexShares Quality Dividend Dynamic Index Fund (QDYN) and the FlexShares Quality Dividend Defensive Index Fund (QDEF) . The suite includes a group of smart-beta ETFs that focus on both quality and dividends.
For more ETF-related commentary from Tom Lydon and other industry experts, visit our video category.
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