One-Click Global Diversification
The Global Asset Allocation ETF provides easy, low-cost exposure to a range of assets across the world.
I love learning about investing strategies, whether that’s from following industry veterans on Twitter, listening to podcasts, reading white papers… You can find an endless amount of content out there. The hard part is deciding what your approach will be and sticking with it. The temptation is to chase the next shiny object that comes along, especially when your own strategy is under-performing.
One of the investors I enjoy following is Meb Faber, founder of Cambria Investments. In general, he advocates for a quality and value tilt using quantitative (rules-based) investing strategies with broad diversification. This is reflected in the ETFs that Cambria Investments has launched over the past few years.
Global Asset Allocation (GAA)
My favorite ETF, which I use as a core holding in my portfolio, is the Cambria Global Asset Allocation ETF. This is actually an “ETF of ETFs” - GAA is composed of ~29 underlying ETFs. Most of these are funds from Cambria and Vanguard.
It’s a one-click diversified portfolio actively managed by Cambria. The goal is to “reflect the global universe of assets consisting of domestic and foreign stocks, bonds, real estate, commodities and currencies.” The target weightings are: 45% equities, 45% fixed income, 10% other assets (commodities, currencies, real estate, alternative).
The GAA ETF itself charges a 0% management fee, as the total expense ratio of 0.37% is solely from the underlying ETFs. While this expense ratio is already relatively low, Cambria uses securities lending with its assets to subsidize the expense ratio for its investors. According to their most recent report, this reduced the net expense ratio of GAA from 0.37% to 0.16%.
“Securities lending is a long-held practice whereby ETFs make loans of stocks or bonds to seek an incremental increase in returns for fund shareholders. While not without risk, securities lending seeks to benefit ETF shareholders.”
GAA In My Portfolio
The diversified approach of GAA, by both asset class and geography, does not typically lead to massive annual returns. From my perspective, this is a fairly conservative strategy with a long-term focus. That’s not for everyone, but it fits my personal goals for this portion of my investing portfolio.
For me, the beauty of GAA is in the simplicity it provides investors. It doesn’t require a new robo-advisor account to sign up for, you don’t have to rebalance your portfolio to maintain appropriate weightings, and you can buy/sell through your existing brokerage account. Despite that simplicity, you get a low-cost and professionally curated investment.
If the one-size-fits-all approach isn’t your style, you can also consider making this a core holding and add your own tilt on top. For example, using M1 Finance (my brokerage platform, covered in a future post), I set GAA as the majority of my portfolio and added US and Emerging Market Small Cap ETFs to increase my equity exposure.
Hopefully, we get Eric Balchunas of Bloomberg’s ‘Trillions’ podcast to provide more analysis on GAA and similar ‘all-in-one’ ETFs (which are rare!).
To learn more about the Global Asset Allocation ETF, you can check out the fund page.
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