Stocks and bonds are the lynchpins of core investing, but investors can face capital constraints when it comes to building efficient, diversified portfolios. In a hypothetical example, say an investor with $10,000 wants access to rising equities with the diversification and protection benefits offered by high-grade bonds. It’s not an impossible task with that amount of money, but it may not be enough to deliver desired exposures and efficiencies. Fortunately, some ETFs solve the quagmire for investors. Enter the WisdomTree U.S. Efficient Core Fund (NTSX).
The premise behind the $1.39 billion NTSX, which turns eight years old in August, is simple. The ETF invests in domestic large-caps and U.S. Treasury futures contracts. So, under one roof, investors can access equities and the equivalent of fixed income exposure. Indeed, NTSX lives up to its efficient billing.
Though NTSX isn’t a new ETF, consider it a fresh take on traditional 60/40 investing. That’s a positive for advisors and investors looking to liven up the gold standard in portfolio construction. However, some investors don’t want to sacrifice equity market participation by allocating up to 40% of their portfolios to bonds. That’s where NTSX’s Treasury futures strategy can make an impact.
“We think this is where a futures overlay can add value, delivering the desired portfolio diversification without sacrificing potential equity upside, changing existing allocations, or altering investment objective,” noted WisdomTree.
More NTSX Perks
With the inclusion of Treasury futures, NTSX can be a valid core consideration for long-term investors. The fact that the ETF’s methodology provides protection during sharp equity market retrenchments enhances that thesis. Getting back to even and beyond after corrections and bear markets requires less work.
“The WisdomTree Efficient Core Family can potentially mitigate the adversity during volatile periods. For example, the WisdomTree U.S. Efficient Core Fund (NTSX) exhibited a much smaller drawdown than U.S. equities, fixed income, long/short strategies and blends of these three during the onset of the pandemic and subsequent market volatility,” added the issuer. “Consequently, it also required less upside thereafter to restore the lost value.”
Risk-averse investors aren’t the only audience for NTSX. Advisors and investors seeking tax efficiencies may want to examine this ETF as well. The fund’s use of Treasury futures, not standard taxable bonds, creates that advantage.
“Interest income from owning cash bonds outright is taxed as ordinary income, even during periods when bond prices fall as a result of rising rates. Futures contracts have a more favorable tax treatment since the majority of return is taxed as long-term capital gains, which can be a more favorable rate for investors,” said WisdomTree.
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Disclosures
This article was prepared as part of WisdomTree’s general paid sponsorship of VettaFi | ETF Trends. This specific content within and any opinions expressed therein belong solely to VettaFi and do not reflect the opinion or analysis of WisdomTree, its employees, or its affiliates. Content published on VettaFi | ETF Trends is provided for educational purposes only and should not be considered investment or tax advice. For investment or tax advice, please consult a financial professional.
WisdomTree is an independent company, unaffiliated with VettaFi | ETF Trends. WisdomTree has not been involved with the preparation of the content supplied by VettaFi | ETF Trends. It does not guarantee, or assume any responsibility for its content.
