Larry Berman

Berman's Call

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This year at the TMX VettaFi annual ETF conference in South Beach always features the newest ETFs and the like. The buzz of course is the new crypto ETFs that were recently approved in the U.S. market. This falls into the wide category of thematic investing. I’m an outspoken critic of having crypto in your portfolio, but for some it may be appropriate. Portfolio construction can be thought of in many ways. We build our ETF portfolios for clients in what’s called a core-and-explore style.

Core exposure can be looked at from the base case of the World Index (VT). A full two-thirds of equity market capitalization comes from North America with Canada only 2.58 per cent. So unless you are looking for Canadian Dividend stocks in your taxable account, looking around the works is essential. Canada has very little of the technology of the future in terms of investable exposure in our market index.

 Core exposure to market beta or the main market indexes like the S&P 500, S&P TSX, MSCI EAFE (International Developed Markets) or EM (Emerging Markets) and the explore is where we are seeking Alpha. That is outperformance versus the core portfolio.

• Artificial Intelligence
• Cyber Security
• Biotech
• Robotics
• Clean Energy
• Medical Marijuana
• FinTech
• Global Infrastructure
• Clean Water

These are amongst some of the themes we have in our current ETF portfolio. As a prudent guideline, this Alpha seeking part of the portfolio is going to be somewhere between 20-40 per cent of the portfolio depending on the current value and opportunity.

When building your DIY ETF portfolio, give some thought to the core-and-explore style.