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Stan Wong in the Globe & Mail

Even ETF portfolios need rebalancing

February 8, 2017

…Stan Wong is also an advocate of the value of ETFs in most portfolios, and also stresses the need to rebalance. The director and portfolio manager at Scotia Wealth Management in Toronto says investors should rebalance their equity and fixed-income allocations from time to time to reflect current objectives and risk tolerances.

In addition to watching asset-class levels, Mr. Wong also recommends investors take a tactical approach to rebalancing ETF holdings – especially when it comes to funds that focus on a certain sector of the market, or geographic region. “If the outlook for a particular sector or style of ETF falls out of favour, investors should act accordingly,” he says.

As a corollary to that approach, Mr. Wong notes that since the U.S. election, there has been a significant rotation from perceived “safe assets” (such as defensive equities, government bonds and gold) to “risk-on” assets, or assets that tend to be bought during lower-risk markets, (cyclical equities, high-yield bonds and energy and base metal commodities), as new U.S. President Donald Trump indicates a pro-business stance, and introduces measures to stimulate the economy.

He expects this trend to continue over the medium term, so is recommending certain ETFs focused on specific sectors such as financials, industrials and materials. He also notes value stocks are outperforming growth stocks in the current environment so he recommends ETFs that focus on value investing…

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