Did you know that 2015 marked the first year in investment history that exchange traded funds (ETFs) occupied the #1 spot as the most widely used investment among financial advisors?
There are many options when it comes to investing: stocks, bonds, mutual funds, and hedge funds, among many others. Since our inception, ClearRock has dedicated our focus to one particular investment: ETFs (exchange-traded funds).
We chose ETFs because our clients were not interested in taking undue market risk; they simply wanted exposure to the markets but not the risk associated with one specific company. Today, 81% of financial advisors use or recommend ETFs for their clients. Not to our surprise, ETFs have become the most popular investment choice at the expense of mutual funds and annuities.
10 years ago, variable annuities had an adoption rate among advisors of 58%. Today that number is down to only 38%. Mutual fund use, which enjoyed a decades-long growth rate, finally slipped from an 85% adoption rate in 2006 to 78% today. These trends highlight that investor and advisor demand has moved away from often opaque, less liquid, high-cost products like annuities and mutual funds in favor of more transparent and low-cost ETFs.
There are plenty of theories as to why ETFs have experienced such widespread, rapid growth. Most surprising to us is the relative outperformance of ETFs vs. mutual funds. The chart below shows that large value, growth, and blend ETFs outperform mutual funds on a 3, 5, and 10-year time horizon. Not coincidentally, ETFs outperform mutual funds by roughly the same amount of a typical mutual fund fee.
Our core investment philosophy consists of three simple principles:
1. Wealth accumulation is a long term endeavor
2. Diversification works
3. A tactically managed globally diversified portfolio of ETFs is a superior way to manage volatility and drive performance
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To learn more about our ETF portfolios, contact us today: 877-726-8978 or firstname.lastname@example.org.
2015 Trends in Investing Survey, Financial Planning Association (FPA), Journal of Financial Planning, & FPA Research & Practice Institute; ETF Trends; Bloomberg.
Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. There can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by ClearRock Capital LLC), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.
Do not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from ClearRock Capital LLC. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. ClearRock Capital LLC is neither a law firm nor a certified public accounting firm. No portion of the newsletter content should be construed as legal or accounting advice. A copy of the ClearRock Capital LLC’s current written disclosure statement discussing our advisory services and fees is available for review upon request.