A New ETF Gets Tactical With Growth Stocks

Amplify ETFs added to its lineup of exchange traded funds Thursday with the launch of the Amplify EASI Tactical Growth ETF EASI.

The new ETF is a departure from conventional equity funds. When stocks are moving higher, EASI allocates to high-quality growth companies, but when markets falter, the new ETF can rotate into bonds to potentially limit investors' downside exposure.

What Happened

The new ETF tracks the EASI Tactical Growth Index, which “uses a rules-based methodology designed to optimize risk-adjusted returns by tactically rotating between exposure to growth stocks (in periods of upward momentum) and fixed-income securities (seeking lower volatility during periods of momentum loss),” according to Amplify.

For much of the current U.S. bull market, momentum fare has trounced value stocks, but when momentum stops working, the declines can be severe.

Why It's Important

EASI's “initial universe for the equity allocation consists of all securities listed on the New York Stock Exchange and NASDAQ,” according to a statement from Chicago-based Amplify.

“Constituents are then narrowed by excluding all securities with an average daily volume in the last 50 days of 300,000 or more shares. All remaining companies are scored once a month in two major areas: price performance and fundamentals. The final equity portfolio will invest at least 80 percent of its total assets in 33-50 holdings, in accordance with the index.”

The new ETF debuted with 50 holdings. Technology and financial services stocks combine for 52 percent of EASI's weight, while the health care and energy sectors combine for 23.7 percent.

What's Next

EASI, the second ETF launched by Amplify this month, could find a following among momentum investors that like the idea of not having to precisely time when momentum stocks could fall out of favor.

The new ETF charges 0.75 percent per year, or $75 on a $10,000 investment.

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