About the Editor
Ben Johnson, CFA, is director of global ETF research for Morningstar. Before assuming his current role in 2012, he was director of ETF research for Europe and Asia. He also previously served as a senior equity analyst, covering the agriculture and chemicals industries. Before joining Morningstar in 2006, he worked as a financial advisor for Morgan Stanley.

Johnson holds a bachelor's degree in economics from the University of Wisconsin. He also holds the Chartered Financial Analyst® designation. In 2015, Fund Directions and Fund Action named Johnson among the 2015 Rising Stars of Mutual Funds.


Investment Strategy
Morningstar ETFInvestor scans the globe for value and improving fundamentals across virtually all asset classes. Editor Ben Johnson draws upon academic and practitioner research — including Morningstar's sizeable bench of stock, bond and fund analysts — to find reliable drivers of outperformance.

Morningstar ETFInvestor features two real-money portfolios.

The ETF Income Portfolio assembles a high-quality collection of income-generating ETFs with the goal of earning 5% in excess of the 30-day T-bill rate over a full business cycle. The portfolio adheres to a benchmark-agnostic strategy in its search for absolute returns.

The ETF Global Asset Allocation Portfolio, on the other hand, is more benchmark sensitive. It seeks undervalued asset classes with improving fundamentals. The strategy seeks to beat the 60/40 MSCI ACWI/Barclays US Aggregate benchmark over a full business cycle, with the least risk possible.

 
 
Jul 31, 2015
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About Editor Editor's Photo
Ben Johnson, CFA,
Director, Global ETF Research and Editor
Ben Johnson, CFA, is director of global ETF research for Morningstar. Before assuming his current role in 2012, he was director of ETF research for Europe and Asia. He also previously served
Featured Posts
ETFInvestor Weekly Update - July 24, 2015

Miscellany

I have a few odds and ends for you this week...

Thoughts on Gold

I had mentioned in the June issue of ETFInvestor that I wasn’t comfortable with the Income Portfolio’s allocation to iShares Gold Trust IAU. Here’s what I said then:

I don’t like having an asset that doesn’t produce income in the Income Portfolio. While gold might be a decent insurance policy against a host of nasty outcomes, it doesn’t pay the bills. Like any insurance policy, there is a real opportunity cost associated with holding gold. In this case, the cost can be measured in forgone income opportunities in a portfolio that is trying to provide an annualized return equal to the 30-day T-bill rate plus 5% over a full business cycle.

I’ve become even less comfortable in recent weeks as IAU has slipped some 9% since mid-June. What’s next for gold? I have no idea, and frankly neither does anyone else. Anyone who tells you they know what an ounce of gold will be worth tomorrow, the next day, or ten years from now is probably trying to sell you something (odds are that it is shiny and yellow). I’ll be liquidating the portfolio’s stake in gold soon. I’ll send a trade alert out as soon as I’ve decided to execute.

Insider Transactions

Following my recent update on PIMCO Dynamic Income PDI and PIMCO Dynamic Credit Income PCI many of you asked how you could monitor insider trading activity for these funds. I personally am “following” these funds on NASDAQ’s site and have set up alerts for each. This requires that you create a free account with the site (though you can also login using credentials borrowed from Google, Twitter, etc.). If you’re not keen to create an account, you can simply peruse the insider activity pages. You can access PDI’s here and PCI’s here.

Morningstar Market Outlook – Q3 2015

Our third quarter market outlook has just been posted to the ETFInvestor site. You can find the link to the full report at the bottom left-hand corner of the home page. The report contains a wealth of insights from my colleagues in equity and credit research.

What’s my key takeaway from this report? Stocks appear fully valued, so investors should tread carefully and manage their expectations--returns will likely be disappointing over the next few years.

Best,

Ben

 


 

From Morningstar.com

John Rekenthaler asks: why should current fund shareholders pay to get new shareholders? Don’t think that these arrangements are unique to mutual funds--commission-free ETF trading platforms are typically a pay-to-play affair too.

Alex Bryan describes what upcoming index changes will mean for iShares MSCI USA Value Factor VLUE and  iShares MSCI USA Quality Factor QUAL.  Alex thinks that this change does not make QUAL any more or less compelling, but is a meaningful improvement for VLUE.

Elsewhere…

James Osborne of Bason Asset Management interviews Alpha Architect’s Wesley Gray on his Fireside Markets podcast. The two cover a wide range of topics from value, to Buffett, to our “monkey brains”. It’s all good, but the last 10 minutes are absolutely worth a listen.

Portfolio Holdings
Income Portfolio
ETF
YTD Ret %
Price $
0.4
107.6
CASH$
N/A
1.0
-3.0
54.9
8.8
67.1
-8.1
10.5
-5.2
19.6
-5.5
29.1
-2.9
38.7
2.3
25.3
Global Asset Allocation Portfolio
ETF
YTD Ret %
Price $
0.4
107.6
CASH$
N/A
1.0
-3.0
54.9
-4.9
19.6
-5.5
29.1
-2.9
38.7
5.7
40.0
-1.1
80.3
2.3
25.3
Most Popular ETFs
ETF Name
YTD Rtn %
3 Yr Rtn %
Trading Vol.
NASDAQ 100 Trust Shares
-10.76
1.45
125,000,944
SPDRs
-3.64
2.68
87,466,496
Semiconductor HOLDRs
-6.23
-11.66
26,838,700
iShares MSCI Japan Index
-6.59
7.18
17,256,500
iShares Russell 2000 Index
-7.46
6.43
16,210,700
Energy Select Sector SPDR
15.88
15.50
14,900,000
Financial Select Sector SPDR
-8.42
2.61
11,612,800
DIAMONDS Trust, Series 1
-3.75
2.21
7,350,600
Utilities Select Sector SPDR
6.84
6.82
3,848,200
Materials Select Sector SPDR
-4.31
8.50
2,179,300
 
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