iSectors® Domestic Equity Allocation
The iSectors® Domestic Equity Allocation is a value-focused, index-based ETF allocation model. The portfolio overweights ETFs that own quality dividend paying companies emphasizing those that have increased their dividends every year for many consecutive years. This strategy is based on iSectors® research that indicates the value of dividends in providing long-term returns and reduced volatility. In addition, our study suggests that the best approach to selecting dividend-paying equities while avoiding the landmines (dividend-paying companies that go out of business or drastically cut dividends) is to choose companies of high quality. These may be companies with a long history of consecutive annual dividend increases, low price volatility, high excess cash flows, and/or strong balance sheets. These are primarily large, U.S.-based, multinational companies but include small- and mid-cap companies as well. The model also holds some ETFs that own growth stocks (large-, mid-, and small-cap) to provide additional capital gain opportunities. These global companies derive substantial revenues (35-40%) from international and emerging market countries. Therefore, we do not add international or emerging market ETFs to avoid over-allocation to these asset classes. Sticking with U.S.-based stocks also reduces exchange rate risk for U.S. residents.