iShares Growth Allocation ETF (AOR)
AOR (Click to Enlarge)The last fund on my watch list with a defensive tilt is the iShares Growth Allocation ETF (AOR). This ETF is a “fund of funds” that incorporates other iShares equity and bond ETFs in its asset allocation strategy. The current makeup is tilted 65% stocks and 35% bonds, which makes it more of a balanced offering.
The advantage of the bonds in the portfolio is that they can often function as a shock absorber to cushion equity volatility. However, it still has just enough domestic and international stock exposure to warrant upside opportunity during bullish cycles.
The net expense ratio of this ETF is just 0.3%, and iShares lists the beta to the S&P 500 at 0.69. This means that you will essentially capture 70% of the upside in stocks based on the current underlying holdings.
Each of these funds can be used as core holdings or tactical opportunities depending on your current portfolio positioning. While they are not designed to completely eliminate the risk of declining stock prices, they should give you a measured dampening effect when volatility rears its ugly head. In addition, they have the opportunity to still participate in a rising stock environment during growth phases.
David Fabian is Managing Partner and Chief Operations Officer of FMD Capital Management. As of this writing, he was long USMV. To get more investor insights from FMD Capital, visit their blog.