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ETF Specialist

Burned by the Last Bear Market? Consider This ETF

This ETF doesn't tolerate large losses.

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It is well-known that a diversified portfolio will have a lower volatility and more consistent returns than a portfolio concentrated in only one asset class. But if volatility is as extreme as we saw in 2008, even a diversified portfolio will suffer large losses. For example, the Morningstar Moderate Target Risk Index, which has a 60% equity/40% bond allocation, suffered a loss of over 33% from October 2007 to March 2009. Losses of this size are likely to cause many people to sell out of the market completely--at exactly the wrong time. The strategy employed by  Cambria Global Tactical ETF (GTAA) seeks to reduce the chance of large negative returns by selling out of the market early based on a systematic trend-following strategy. GTAA may be a good choice for investors who can't tolerate large losses in their investment portfolio.

GTAA is an allocation fund for those with a moderate to aggressive risk tolerance who are interested in an actively managed absolute-return strategy. It is intended to serve as a core holding, either by itself or paired with other alpha-seeking active funds. For investors who do not have the time or inclination to research, monitor, and rebalance multiple funds, allocation funds like this provide a simple solution.

Timothy Strauts does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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