Uncertainty continues to define the investing landscape. Finding the best ETFs highlights the challenge of making money amid so many unknowns.
The bond market remains volatile. The threat of a global trade war creates risk for both investors and businesses. The Fed has not cut rates yet in 2025 and may be unwilling to do so until it feels better about inflation trends. All of this helps to question the outlook for financial markets and the economy. It's the kind of environment where a steady and disciplined approach may be just what investors need.
Advisors must navigate a market where macroeconomic shifts, geopolitical tensions and interest rate uncertainty reshape the investing environment. And clients are more focused on managing downside risk without sacrificing the potential for long-term growth. This dual mandate of protecting capital while seeking returns is pushing advisors to think more strategically about asset allocations, fund selection and portfolio construction.
One advisor embracing that approach is Joe Fernandez, founder, president and CEO of Invenio Wealth Partners in Coral Gables, Fla. He says his firm's focus "is to ensure that clients enjoy the benefits of comprehensive planning and objective investment advice without the conflicts inherent in proprietary products." Invenio manages more than $330 million of client money, and his team has a combined 70 years of experience in investment management and planning.
Investor's Business Daily asked Fernandez for his views on the markets and where he thinks there might be opportunities. He emphasizes cost-efficient strategies and ways to diversify around a traditional U.S. core equity portfolio.
Managing Risk In Fixed Income By Best ETFs
Several segments of the bond market have struggled over the past several years. 2022, in particular, was tough for fixed income. Bonds suffered from negative returns in many segments. But they also failed to behave as a risk-off asset that can help protect against losses in stocks. Fixed income should not be ignored, though. Fixed income, however, requires a more flexible approach.
Fernandez likes the Vanguard Core Bond ETF for exposure. The ETF is an analog to the Vanguard Core Bond Fund mutual fund that's been around since 2016. In true Vanguard fashion, it comes with an ultralow 0.1% expense ratio. But it's one of only a handful of Vanguard ETFs that are actively-managed. Fernandez likes the fact the ETF accesses all parts of the bond market. And it focuses on security selection and sector allocation in an attempt to outperform the market.
Overall, Fernandez feels that managing some of the risks associated with bonds should be a focus. He said, "Given the likelihood of continued interest rate volatility for the foreseeable future and the benefit of active management overlay, we like this fund as part of our fixed income allocation for clients."
Best ETFs Diversifying Globally
Over the past several years, many investors have kept their portfolios very U.S.-focused. There's often a significant discrepancy between U.S. and international stock returns. Over time, this means that foreign investing often gets ignored.
Fernandez, however, still believes in global diversification. But he prefers to do it broadly and at a razor-thin cost. That's why he prefers the SPDR Portfolio Developed World ex-U.S. ETF. It targets many of the largest non-U.S. markets in the world. But it stays away from the more speculative emerging markets where risks may be higher. SPDW charges just 0.03% annually and has an 18-year track record.
The ETF offers diversification benefits. But Fernandez also believes current geopolitical events and a changing global trade environment could result in portfolio returns coming from elsewhere in the world. He said, "As forward returns are likely to be impacted by the ongoing restructuring of the global trade and economic system, we believe that broad exposure here without overweighting particular sectors is the best approach for clients."
Believing In The Power Of Dividends
Since coming out of the Covid pandemic, tech, growth and AI stocks dominated the U.S. stock market. Dividend stocks have enjoyed a lengthy history of solid risk-adjusted returns. But they have only been in the market's favor for relatively brief periods over the past several years. Fernandez, however, still believes in the long-term story around dividend stocks and their potential. "While growth style investments have performed well in the recent past, we believe that, over time, dividends have provided the lion's share of the market's real return over time," he said.
In this space, he likes the WisdomTree High Dividend ETF. "As a complement to core and growth equity strategies, we like this fund for some of the potential downside mitigation this style of investing can bring," he said. Outside of the focus on dividend payers, Fernandez likes that DHS takes a bit of a multifactor approach to security selection. He points out DHS will "risk-score the universe of investees and weight relative to quality measures."
Some investors may be turned off by the comparatively high 0.38% expense ratio of DHS. But Fernandez isn't as concerned. "We think this is a reasonable cost for the work that goes into constructing the investments," he said.
