NIXT
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>The median announcement reaction was about 1.6%, and names that had already run up significantly before confirmation tended to see much less additional benefit into the rebalance. Rob Arnott at Research Affiliates has done some research showing stocks are typically added to the S&P 500 after a major run-up, and then tend to have disappointing performance in the few years afterwards. Additionally, the stocks cut from the S&P 500 tend to rebound shortly after elimination. https://www.rafi.com/research/publications/articles/674-buy-high-and-sell-low-with-index-funds Arnott's firm launched a new ETF called NIXT which aims to benefit from this rebound effect after de-listing from the major indexes.
>He is a big proponent of investing based on fundamentals. most professional investors are the same, because all the data shows the best long-term investments are ones with good fundamentals. short-term, anything can happen. but long-term you want to own stocks from companies with good profits, low debts, and the stock is reasonably priced. >Slow steady gain beats spikes and crashes. Is he right? yes. there's actually data showing boring and conservative stocks are usually the best long-term investments. https://www.robeco.com/en-us/insights/2022/05/conservative-investing-stands-the-test-of-time professor Jeremy Siegel has used the example of Exxon vs. IBM. For most of the 20th Century, IBM was one of the leading tech companies in the world. They invented and created so many important tech innovations that it's mind-boggling. They had excellent revenue growth. But 1950 to 2012, IBM stock underperformed Exxon, a boring oil company, partly because IBM's stock was too expensive relative to fundamentals. https://mskousen.com/2015/08/my-review-of-jeremy-siegels-classic-stocks-for-the-long-run/ >But, wouldn't a crash bring all stocks down... even good firms. yes, but part of the strategy with value investing buying companies that don't have crazy enthusiastic expectations. if a high-flying company like Nvidia has bad news, everyone is going to freak out because they expect 100% perfection and global domination. that freak out will be reflected in the share price. But if you buy a company that everyone thinks is terrible, and it actually turns out to be mediocre or good... that's a much better investment. for example Rob Arnott has a newer ETF called NIXT which holds companies that have recently been dropped from the major stock indexes. the research shows these companies have often bottomed in price, and are regarded as hopeless garbage ... but as a group they have excellent performance in the few years after they're dropped from the S&P 500 or whatever. >He and his team have found consistent outperformance from stocks that are dropped from big indices such as Dillard’s, the department store chain, which was ejected from the Russell 1000 in 2017, only to return about 535 per cent over the next five years. https://www.ft.com/content/ace4e019-7542-47f4-b903-6d5030ac30f7
19 y/o from the US, and getting into investing for my future rather early I’ve started a freelancing business for myself, and tend to save more than spend., and plan on allocating some money I’ve made with my job into my future I’ve chosen to put away $30k, with $10k in domestic stock, $10k international, and $10k in laddered CDs (shorter term). These are my domestic choices: * S&P 500 weighted: $5k * S&P 500 unweighted: $2k * NIXT (S&P removed): $1k * VO (Mid-cap): $1k * GDMN (gold): $1k As for international, I was planning on doing 10k in VXUS. I'm pretty much just looking for a sanity check / advice on this portfolio. Is this a good strategy? I’m not quite sure how long I want to keep it, but know it'll be longer-term — likely 10, maybe 20, or 30+ years
This is not entirely what you are looking for, but there is an ETF, NIXT, that tracks stocks that have recently been dropped from the S&P500 and Russell 1000. Reading up, they have a decent strategy. The website and prospectus may give you some useful insights. https://nixtetf.com/etf/