Advantages of Individual Stocks, Bonds & ETFs

CLS combines ETFs, individual stocks, and individual bonds within each Separate Accounts portfolio in order to meet investor objectives and preferences, as well as to take advantage of the distinct benefits of each investment type.

Advantages of ETFs
  • No minimums, front-end loads, or redemption fees, so they can offer significant cost savings over mutual funds.
  • Distribute fewer capital gains to shareholders than mutual funds, which makes them more tax efficient.
  • Designed to track market indexes that may contain hundreds or thousands of securities.
  • Trade throughout the day, so their price fluctuates with market supply and demand.
  • Most report exact holdings daily, which means they usually closely track their benchmarks.
  • Can provide much more stable market exposure than mutual funds.
Advantages of Individual Stocks
  • More potential than ETFs or mutual funds for outsized gains.
  • Provide opportunity for portfolio modification based on investor preference (for example, if the investor holds significant shares in an energy company, we can exclude other energy companies to reduce overexposure to that sector).
  • Enable us to follow specific companies at the investor’s request.
  • Provide tax-sensitive investors opportunities to harvest losses throughout the year.
  • Offer advantages in a market environment where stock picking adds value over index solutions. For example, if some energy stocks are doing very well and others are struggling, buying an energy ETF may not be as effective as picking individual energy stocks.
Advantages of Individual Bonds and Active Bond Management
  • Not affected by activity of other investors (bond funds frequently buy and sell bonds, and rarely hold them to maturity, so they are affected by current market conditions).
  • Offer a finite maturity date on which the investor gets his or her principal back (there is no date on which an investor can expect a bond fund to return 100% of principal).
  • Offer lower costs and potentially higher yield than bond funds.
  • Provide fixed income payments.
  • Provide the flexibility to customize the portfolio to address specific tax considerations and credit risk concerns.
  • May create more stability in the portfolio since we have better control over the price at which individual bonds are purchased and sold versus bond fund shares.

Active Bond Management

CLS’s active bond management approach allows us to take advantage of bond market inefficiencies by adjusting portfolio allocations when opportunities arise and market conditions change. Additionally, bond duration management provides liquidity by allowing us to target specific maturity dates. It may help preserve portfolio principal by aiding with risk management. We rely on quantitative and fundamental research to guide us in adjusting portfolio allocations when opportunities arise to maximize yield.