In Jason Zweig’s October 15th Wall Street Journal column titled, “When Cheap Funds Cost Too Much,” he provides investors with some excellent points regarding ETF managed portfolios, but also makes several points that could leave readers confused as to why ETF managed portfolios are growing so rapidly and have crossed $200 billion in assets.
Mr. Zweig’s perspective runs contrary to those of many investors and advisors with regard to ETFs. He places a low value on the personal advice advisors provide to their clients through in-person meetings, and borders on implying that advisors do not address the tax implications of a particular strategy with their clients. It’s a sweeping generalization, compounded by the fact that the firms that were included in his article operate primarily online or via the phone, rather than through face-to-face consultation, like the advisors with which CLS Investments, LLC (“CLS”) works. The truth is that advisors and managers of ETFs like CLS, have a duty to act in the best interest of each client and to select the most appropriate strategy for their clients’ tax situations.
Mr. Zweig’s article also does not accurately portray the strategy behind incorporating ETFs into diversified portfolios. Strategists like CLS see ETFs as a technology allowing for creation of portfolios that own narrower market segments, access previously unavailable asset classes, and rotate between asset classes in an attempt to add value. Mr. Zweig pointed out, though he found it surprising, that portfolios with the potential to provide value similar to that of separate accounts will charge fees in the comparable price range.
CLS is an ETF strategist and offers ETF managed portfolios through financial advisors. We have managed individual ETF accounts for over 10 years and manage funds of ETFs, also available through advisors. CLS has over $2 billion invested in ETFs and is also GIPS compliant.
To learn more about how CLS utilizes ETFs please click here: http://www.clsinvest.com/methodology/etfsAn ETF is a type of investment company whose investment objective is to achieve the same return as a particular market index. An ETF is similar to an index fund in that it will primarily invest in the securities of companies that are included in a selected market index. An ETF will invest in either all of the securities or a representative sample of the securities included in the index. 1685-CLS-10/30/2012