Strategist Offers 3 Best 'Creative And Cautious' Investment Ideas

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Some investors prefer to take the summer off to avoid those typically slow months, while others may see it as a chance to buy.

Brian Rorick, partner and co-founder of Aveo Capital Partners, is in the latter camp this year. The wealth management firm, which is based in Greenwood Village, Colo., manages more than $500 million in assets.

[ibd-display-video id=2052364 width=50 float=left autostart=true] "Given the strong rally in equities during the first half of the year, it would not be surprising to see a pullback in equities during the summer months," he told IBD. "Barring any major geopolitical event or significant pullback in the economy, we would view this as a buying opportunity rather than the start of a major drawdown in equities."

But he advises caution, since it can be tough to find strong equity candidates due to current valuation levels. Here are Rorick's three best ETF investment ideas, in his own words:

With U.S. equities trading near all-time highs and interest rates trading near historic lows, this is a challenging environment at current valuations for finding compelling, high-conviction investment ideas over the short- to medium-term time horizon. Equity and income investors need to be both creative and cautious, while also looking to other parts of the financial markets that are not trading at extreme levels.

QuantX Risk Managed Multi-Asset Income ( QXMI )

With the 10-year Treasury yield stuck near 2%, investors have moved into higher risk income investments to meet their income needs. The downside risk in these parts of the market may be underappreciated by many investors.

This ETF is designed to provide exposure to higher-yielding asset classes with downside protection by dynamically allocating to a wide variety of income-producing assets. The fund uses a proprietary methodology to select the best performing fixed-income and equity ETFs to maximize income and capital growth. Portfolio exposure to cash and fixed-income instruments is managed to provide downside protection during times of market stress.

For investors that want to enhance their income beyond traditional fixed income but also want to have the ability to be defensive if rates rise, this is a solid long-term core holding.

QuantX Dynamic Beta US Equity ( XUSA )

This ETF seeks to provide "smarter beta" exposure to domestic equities by using option data to select stocks from the Russell 1000 index that have the most favorable upside relative to downside potential. The overall portfolio beta is designed to dynamically adjust to changes in market volatility to optimize risk-adjusted returns. For investors seeking more asymmetric returns than a traditional index fund this is a solid long-term core holding.

(Editor's note: Both QuantX ETFs, for which Blue Sky Asset Management is investment advisor, were launched in January. QXMI has about $11.6 million AUM and carries a 1.12% expense ratio, according to Morningstar Inc. XUSA has $39.7 million in assets and a 0.59% expense ratio.)

I worked closely with Blue Sky in developing their initial Dynamic Asset Allocation separate account strategies. You could say I was the earliest adopter of their solutions for my clients - who are HNW investors wanting to protect and grow their capital in all market environments. As a result, we must use alternative strategies like the Risk Managed ETFs that Blue Sky offers to provide downside protection above and beyond what is possible with traditional asset allocation/diversification.

As far as the expense ratios, the QuantX Risk Managed ETFs represent alternative investment strategies packaged in the lower cost, transparent and extremely tax-efficient ETF wrapper. Similar strategies have historically been packaged in alternative mutual funds or even hedge funds that have much higher expense ratios, lack transparency and aren't tax-efficient.

SPDR Gold Shares ( GLD )

This is the largest physically backed gold ETF in the world. After posting consecutive years of negative returns in 2013, 2014 and 2015, GLD rebounded nicely in 2016 and continues to post strong returns so far in 2017.

This is an asset that still trades well off its all-time highs, performed very well during the 2008 and 2009 financial crisis, and has shown positive momentum over the past 18 months. Given valuations in other asset classes, we believe this is an asset that investors should consider adding to their portfolio or potentially increasing their current allocation.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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