The siblings of investing are value and momentum. In the following table seek out the best of both. Three value ETFs are VTV, VOE, and VBR with the latter two being among my favorites as they are made up of mid- and small-cap stocks. We gravitate toward ETFs that have a value tilt yet possess strong momentum qualifications. The following table is our momentum “sniffer.”
The following quote comes from an article “Investing’s Odd Couple: Value and Momentum” by Kevin Truitt.
Modern portfolio theory indicates that when you combine assets that are not perfectly correlated, or move in opposite directions, both portfolio volatility and overall risk are reduced. By applying this same sort of thinking to combining the best elements of two seemingly incompatible investment strategies—value and momentum—Asness, Moskowitz and Pedersen found that an investor can garner significant benefits of diversification by combining the best elements of value and momentum strategies. In their research, Asness, et al. found “that value (momentum) in one asset class is positively correlated with value (momentum) in other asset classes, and value and momentum are negatively correlated within and across asset classes.”
ETF Rankings: Note how high value stocks currently rank even as we are witnessing market highs. Seek ETFs that have high absolute acceleration values such as Emerging Markets (VWO), International Dividend (IDV), International REITs (RWX), and Domestic REITs (VNQI). If those asset classes are below target, fill them up with these ETFs.