Good Behavior With This Active Dividend ETF
Behavioral finance attempts to explain investors' decision via combination of behavioral and cognitive analysis coupled with standard economic and financial study. While still a new school of financial thought and analysis, behavioral finance is undoubtedly compelling and useful to those choosing to learn from it.
Behavioral Finance And ETFs
It can and does extend to the world of exchange-traded funds. Just look at the actively managed AdvisorShares Trust (NYSE: DIVI). AthenaInvest Advisors, LLC, which manages DIVI's portfolio, employs behavioral finance as part of the stock selection process for the ETF.
DIVI, which debuted in July 2014, is not limited to holding only U.S. stocks, though as of October 31, North American stocks accounted for about 73 percent of the ETF's geographic weight. Latin America is DIVI's second-largest geographic allocation at 8.5 percent.
A Unique High-Dividend Strategy
DIVI offers meaningful, potentially advantageous differences relative to traditional high-dividend strategies.
“Most high-dividend strategies are domestic-focused and adhere to passive, market cap weighted approaches. DIVI instead collects and measures the intelligent organization of the global equity universe – using a behavioral factor-driven strategy that measures active stock fund managers’ behavior, strategy consistency, and conviction to build a high dividend-yielding stock portfolio that pays its shareholders a monthly distribution,” according to AdvisorShares.
Speaking of yield, DIVI makes good on that front with an indicated yield of 7.81 percent, according to issuer data.
At the end of October, DIVI had the look of a value, at least at the sector level, with energy and financial services names combing for just over 46 percent of the ETF's weight. Consumer discretionary was the ETF's third-largest sector weight at that time at 14.4 percent.
AthenaInvest “believes the most important driver of long-term wealth is emotion. Strategies will always come in and come out of favor but attempting to determine when can prove detrimental. Releasing the emotional brakes can be the best outcome for a diversified investment portfolio and your long-term portfolio goals,” noted AdvisorShares.
DIVI's strategy is working this year. As of the end of November, the ETF was up 21.5 percent year-to-date, more than triple the returns offered by the MSCI ACWI High Dividend Yield Index. Additionally, DIVI's year-to-date returns are nearly quadruple those of the widely followed MSCI All Country World Index.
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