In today’s market environment, investors are increasingly concerned about concentration risk and looking for ways to mitigate it. One strategy that is gaining popularity is investing in value-oriented exchange-traded funds (ETFs). These funds offer a more diversified approach compared to traditional index funds like the S&P 500, providing investors with exposure to companies with low valuations and strong balance sheets.
Avantis Investors, led by chief investment strategist Phil McInnis, has developed an innovative approach to value investing through their U.S. Large Cap Value ETF (AVLV). Unlike typical value ETFs that track indices like the Russell 1000 Value, Avantis incorporates a profitability overlay in their stock selection process. This allows them to identify companies trading at attractive prices while considering their profitability, going beyond the traditional value versus growth classification.
One of the key advantages of investing in the AVLV ETF is its focus on diversification and risk management. By actively managing sector weightings and avoiding overexposure to any single sector, Avantis ensures that investors are not overly concentrated in a specific industry. This approach helps reduce the risk of sector-specific downturns impacting overall portfolio performance.
As of the most recent data, Avantis’ Large Cap Value ETF has delivered a solid performance, with a gain of 7.7% in 2024 compared to the Russell 1000 Value index’s 4.5% return during the same period. The fund’s top holdings include industry leaders like Apple, Meta, JPMorgan, Costco, and Exxon Mobil, reflecting a well-rounded portfolio with exposure to different sectors.
Value-oriented ETFs like Avantis’ AVLV offer investors a compelling alternative to traditional index funds, providing the benefits of diversification and risk management. By incorporating a profitability overlay and actively managing sector weightings, these funds aim to generate better returns in the long run while minimizing concentration risk. For investors looking to enhance their portfolio’s performance and reduce exposure to market volatility, value-oriented ETFs present a viable investment opportunity.