Sometimes your needs will be met more efficiently and with less risk employing ETFs for smaller accounts. They have the advantage of customization, low turnover and diversification. A more detailed look at ETFs can be found on our Investment Companies page.
ETF Model
SCM’s selects eight top quality ETFs for its ETF Model and combines them into several portfolio strategies which match your return needs and risk tolerances to capital market expectations. The ETFs in the SCM Model are grouped to manage expected risk by diversifying valuation approaches, market capitalization and foreign exposure.
ETF Portfolio Management
Based on your needs in terms of risk and return, strategic asset allocation and fund allocation targets are established. The portfolio is invested proportionally into relatively fixed allocations of ETFs. However, these policy fund allocations may change when capital market expectations start to shift.
When the portfolio’s actual percentages deviate from the target allocations through market action, when your circumstances change or allocation target policy shifts, trades are executed manually to rebalance allocations.
ETF Fund Selection
The SCM’ Model ETFs are based on indices where index constituents are weighted either by market capitalization or fundamental measures such as revenues, book value or dividends.
SCM’s ETF selections are index funds, aimed to deliver the performance of a stock or bond index, minus fees. These funds have managers who deliver alpha or market-beating returns by using alternate weighting disciplines such as revenues or book value to allocate the holdings rather than weighting by traditional but biased market capitalization. The cost of an ETF includes index provider licensing and fund administrative fees rolled into an expense ratio. There are no one-time front/back loads or ongoing marketing fees.
ETFs are considered a form of mutual fund under the Investment Company Act of 1940, which means they must be diversified. They do not have any over-concentration in one company or sector. Diversification’s risk reduction enhancement properties keep SCM’s focus on asset allocation while making sure the portfolios aren’t overly exposed to individual stocks, bonds, industrial sectors, countries or global regions.
Traditional mutual funds distribute any capital gains to their investors at the end of the year, whether there were taxable event transactions in the portfolio or not. It’s possible to buy a new fund in December and receive a taxable distribution a week later. ETFs have the tax efficiency of index funds through low turnover.
