Looking for a smart way to diversify your portfolio from an over-reliance on blue chip companies?
Rather than rely on the traditional approach of blindly weighting a passive index tracker with stocks by market capitalization, the Covestor Smart Beta portfolios are calibrated for specific stock features and performance metrics designed to deliver a better risk and return trade-off.
That’s the logic behind the Covestor Small Cap Growth portfolio that utilizes a rules-based and transparent portfolio approach.
This portfolio aims to systematically deliver return and risk characteristics of small-cap growth stocks within the US equity market.
A factor-based approach to portfolio construction is grounded in academic research. The goal is to achieve an alternative risk-return profile, which is more attractive than a simple capitalization-weighted index such as the Russell 2000.
Covestor has undertaken research and back-testing to decide on the fundamental factors and rules used to construct this portfolio.
The portfolio will target an allocation of 300 long positions. Stocks with attractive growth ratios receive higher allocations, and both trailing and forward earnings growth measures are considered when determining allocations.
Even if a company reports better than expected past results, analyst forward estimates are also important in determining attractiveness of the stock.
As a form of risk control, the portfolio construction process is designed to penalize high volatility in stocks and avoid excessive concentration in single sectors of the market.
If your goal is to achieve a risk-return profile that is possibly more attractive than passive index trackers like SPDR S&P 500 ETF Trust, and more transparent and less costly than actively managed mutual funds, you should consider Covestor in-house managed portfolios.
Our team, headed up by Covestor Chief Investment Officer Sanjoy Ghosh, manages these quantitatively-oriented equity strategies in a disciplined manner that compete with actively-traded mutual funds – but at a lower cost to investors.
With an 8 basis point management fee, Covestor Smart Beta portfolios are competitive with existing products in the marketplace.
Also, the Covestor Smart Beta portfolios have low investment minimums of just $5,000 through use of fractional shares.
Like with any other investment product, it pays to do your homework.
Some smart beta indices are pretty straightforward, but others are based on complex methodologies.
Potential investors ought to make sure any new investment is appropriate to his or her overall financial goals and appetite for risk.
So read the individual portfolio profile pages and risk disclosures on our website and consult an investment professional, if need be, to make sure you’re adequately informed before diving in.
Interested in finding out more? You can learn more about Covestor, or try our services with a free trial account.
Disclaimer: Covestor’s Smart Beta Portfolios are not Exchange-Traded Funds or mutual funds but are portfolios made up of individual stock holdings. These portfolios mainly invest in stocks and may not be suitable for all investors. You may lose all or part of investments in these portfolios, and their past performance is no guarantee of future results. You may find additional information on the risks, conflicts of interest, applicable brokerage commissions, fractional shares, tax implications, and limitations on investments and divestments associated with these portfolios (along with Covestor’s full disclosures) on the Forms and Agreements page at covestor.com. Covestor Ltd. is an investment advisor registered with the Securities and Exchange Commission (“SEC”). Registration does not imply a certain level of skill or training. Brokerage services are provided to Covestor clients by Interactive Brokers LLC, an SEC-registered broker-dealer and member NYSE/FINRA/SIPC and a Covestor affiliate. Please note that Covestor’s affiliated broker dealer Interactive Brokers charges commissions separately from and in addition to Covestor’s management fee. In addition to these commissions, whenever the overall monthly commissions paid by all Covestor client accounts do not amount to at least $10 in commissions per account per month, Interactive Brokers will collectively charge Covestor clients any difference between the actual commissions and the $10 minimum, on a pro rata basis. Despite the lower minimum investment required for investments in Covestor’s Smart Beta portfolios, clients must still open a brokerage account with Interactive Brokers LLC and meet Interactive’s $5,000 minimum funding requirement before being able to invest in any portfolios on the Covestor platform.