We use exchanged traded funds (ETFs) to give our clients exposure to a wide range of investments. Our ETF holdings include major market coverage such as the S&P 500, the S&P 400 Mid-Cap Index, the S&P 600 Small Cap index and the international MSCI EAFE indices. We primarily use Blackrock iShares.
We often focus on certain sector funds for opportunities in technology, biotechnology, semiconductors, aerospace and defense, energy, and a few others.
SEPARATELY MANAGED ACCOUNTS
Working with our partners at Morningstar we can offer SMAs. We primarily use Morningstar’s equity portfolios for clients who prefer direct equity ownership and are seeking exposure to large cap value, dividends and large cap growth. Morningstar also offers ESG portfolios using mutual funds.
Direct Indexing allows investors to build a portfolio that seeks to track an index by buying a subset of the index holdings. Through direct ownership of the underlying securities, investors can access personalization preference including sectors, securities, and environmental, social, and governance (ESG) factors. We offer this service as a separately managed portfolio through our partner Morningstar. This service requires sophisticated computer systems and research both of which Morningstar has developed over the last twenty-five years.
A key strategy of this program is tax-loss harvesting (TLH). TLH helps investors lower their tax bill by selling securities at a loss to offset realized capital gains. Morningstar’s research shows that the performance of a hypothetical tax-loss harvesting strategy applied to a broad U.S. market index shows that tax-loss harvesting generates a tax alpha, on average, of over 1% per year.
Direct Indexing is projected to eclipse more traditional investment options with 5 years.
DOGS OF THE DOW
The Dogs of the Dow is a growth and income investment strategy that one our founder, Mr. McBride, has used for over thirty years. The theory is very simple, conservative, and successful. The implementation is straightforward:
- Every January, for each participating client, our firms buys the top ten dividend yielding stocks on the Dow Jones Industrial Average. Dividend yield is the annual dividend (in dollars) divided by the stocks share price. The list is generated each December 31st of the preceding year.
- We buy each of the ten stocks in equal dollar amounts.
- All positions are held for one year, rain or shine. There is no trading after the January purchases.
- The follow January, our firm sells the stocks that fall of the list and replaces those positions with the new entrants.
Although simple, the strategy has produced consistently good returns year-after-year. Ideally (and often) the strategy outperforms the three major US equity indices on the upside and holds its own in down markets. For a extensive analysis of the strategy’s past performance check out the website www.dogsofthedow.com, specifically the Dog Years page.
No strategy can avoid negative returns but the Dogs of the Dow have held up well in down markets. For example, in 2018 the U.S. markets took a massive hit in the fourth quarter of 2018, leading the S&P 500 to lose about 6.2% for the whole year. The Dow was down 5.6% and the NASDAQ declined 3.9%. The Dogs of the Dow lost only 1.5%. But, always remember, past performance is no guarantee of future results.
It is important to note the Dogs of the Dow is an investment strategy, not a tax strategy. There may be both short and/or long term capital gains. We are agnostic regarding taxation.
Below is an excellent video from CNBC outlining the Dogs of the Dow strategy.