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Redrick Terry: 4 your money time now. We’re joined by David Nelson, CEO of NelsonCorp Wealth Management. David, welcome back.
David Nelson: Good morning, Redrick. Thank you.
Redrick Terry: Good morning to you as well. So over the past few years we’ve seen more and more of a concept coming up in investing called factors. Tell us a little bit about this. Is this something that we should be knowing about?
David Nelson: Yes, it is. What we try to discuss on these segments is basically ideas to help people grow their money faster and sell the idea of factors as one of those a new kind of terminologies that exist as far as in our industry, and it’s basically trying to give people a heads up as far as trying to outperform the markets.
This first slide is terrific because what it’s doing here is it’s basically saying there’s roughly 400 identified factors that come into play as far as investing, 771 factor funds. These are ETFs, these are mutual funds that you can invest in, over trillion dollars in assets that exist in this. So this is big, big stuff, and again, important stuff as far as to give people a upper hand as far as investing their money.
Redrick Terry: So that’s right in sync. Great Segue to the next question. How could these factors be used in those investing scenarios?
David Nelson: Yeah, so slide two, again I love visuals. I think of the people out there love them too. I think it makes it a little easier to digest. We’re looking at here the S&P 500 but what we’ve done is we’ve broken it out as far as into two segments. One is the value play, the other is the growth play. Growth typically is implying like technology, things that nature values typically going to be kind of old school type stuff as a general style, not always because these things move a little bit, but what we’re looking at… it’s in blue… is the growth approach.
So again, technology as far as for this period, we’re going back to 1996 folks, we’re coming up here to a to current times 2019, and what we find is that during this period that growth is, on a on a gross basis, killed value during this particular period. However, there’s various periods of time here where value actually outperform growth.
So again, this is one of the strategies. There’s times I’d want to be in growth, there’s times I’d want to be in value, and this is visually showing us that there are distinctions and people can can take advantage of this to try and improve returns.
Redrick Terry: That seems to be the Combo, is growth and value, but what about some of those less common ones. Are those useful still?
David Nelson: They are very useful, and the next slide we’ll walk through that. This one is a fantastic slide. You look at this visually, we’re looking at High-beta. What is High-beta? High-beta is going to be something that is a relatively aggressive stock. It’s going to move higher, more when the markets go up, and it’s going to move more when the markets go down. Then we’re looking at low volatility type stocks. That would be in red.
So again, that’s a safer path. This is a more adventuresome path, but at the end of the day, certainly the High-beta during this particular period of time is outperformed. Now, the point of all of this is to basically create a portfolio that may have this at certain times in the portfolio and this at certain times in the portfolio. Again, with proper tools, that’s the goal. What we’re attempting to do is to try to figure out where we want to be at various points.
Redrick Terry: Great stuff as always, David. Thanks for coming in.
David Nelson: Thank you. Appreciate it.
Redrick Terry: All right, and if you missed any of our conversation, we’ll put it on our website for you. That’s ourquadcities.com.
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