What is the IVAL ETF ?
In the world of finance, Exchange-Traded Funds (ETFs) have gained immense popularity due to their flexibility, diversification, and ease of trading. One such ETF that has caught the attention of investors is the IVAL ETF. In this article, we will delve into the details of the IVAL ETF, its underlying strategy, benefits, and important considerations for potential investors.
IVAL ETF: Overview
The IVAL ETF is an actively managed fund that is overseen by Empowered Funds, LLC, doing business as EA Advisers. The investment adviser manages the fund using a proprietary methodology developed by Empirical Finance, LLC, also known as Alpha Architect, and licensed to EA Advisers.
The primary objective of the IVAL ETF is to identify and invest in approximately 50 to 100 undervalued international equity securities with the potential for capital appreciation. The fund focuses on companies traded in developed non-U.S. markets, specifically countries included in the MSCI EAFE Index. It primarily targets highly liquid small, mid, and large-cap stocks, and the smallest-cap stocks in the initial universe typically have a market capitalization above $1 billion.
IVAL ETF: Underlying and Exposure - What Does It Track and How?
The underlying strategy of the IVAL ETF involves a multi-step, quantitative, rules-based methodology. The investment adviser employs proprietary screens to identify undervalued securities and avoid potential "value traps."
The first step involves analyzing a universe of liquid stocks traded in developed non-U.S. markets. The adviser eliminates illiquid securities, real estate investment trusts, exchange-traded funds (ETFs), stocks of financial firms, and stocks of companies with less than twelve months of available financial data.
Next, the adviser uses a value-driven approach to identify the cheapest companies based on the "enterprise multiple," which is a firm's total enterprise value divided by its earnings before interest and taxes (EBIT). Additionally, other common value metrics like book-to-market, cash-flow to price, and earnings to price are considered. The adviser also employs an ensemble of quality screens to select the top 50 to 100 stocks from the cheapest stocks.
As of September 30, 2022, the IVAL ETF had significant exposures to the Materials (31.5%), Energy (28.3%), Industrials (17.6%), and Consumer Discretionary (13.6%) sectors.
IVAL overlap What is the IVAL ETF ?
IVAL ETF: Benefits of Investing
Investing in the IVAL ETF comes with several potential benefits. As an actively managed fund, the investment adviser aims to capitalize on undervalued international equities with the potential for capital appreciation. By using a proprietary methodology and an ensemble of quality screens, the fund seeks to identify companies that may outperform the broader market.
Moreover, the IVAL ETF provides investors with diversification across various sectors and geographic regions. The focus on undervalued securities also offers the potential for long-term growth while mitigating some risks associated with investing in individual stocks.
IVAL ETF: Considerations Before Investing
While the IVAL ETF presents attractive features, potential investors should consider some factors before making their investment decisions. Firstly, it's essential to understand that actively managed funds may have higher expense ratios compared to passively managed ETFs that track broad market indices.
Additionally, like all investments, the IVAL ETF carries inherent market risk, and its performance may be subject to the volatility of the international equity markets. Investors should carefully assess their risk tolerance and long-term investment goals before adding the IVAL ETF to their portfolio.
Conclusion:
The IVAL ETF offers investors an opportunity to gain exposure to undervalued international equities and potentially capitalize on their capital appreciation. Its active management strategy, backed by a proprietary methodology, aims to select stocks with promising prospects. However, investors must conduct thorough research and consider their risk appetite before making any investment decisions.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. The content provided does not offer any investment advisory services. Investors should consult with a financial professional or advisor before making any investment decisions.
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FAQ
What is the IVAL ETF?
The IVAL ETF is an actively managed exchange-traded fund that invests in equity securities of companies publicly listed on major U.S. national securities exchanges. It focuses on the largest approximately 500 domestic equity companies based on their free float market capitalization, which form its investable universe.
How does the IVAL ETF's investment strategy work?
The IVAL ETF uses a market "sentiment" based investment strategy, driven by its proprietary web-based algorithm called the Reverberate App. The app collects, analyzes, and processes feedback from users, which includes public sentiment about the listed companies. When sentiment is positive for a particular company, the ETF's holdings of securities from that company increase, and vice versa for negative sentiment.
What is the Reverberate App, and how does it influence the IVAL ETF's portfolio?
The Reverberate App is a web-based application developed by the ETF's Adviser. It allows users to provide immediate feedback on the companies listed in the app, capturing the satisfaction and utility the public receives from these companies. The app's proprietary technology and algorithms convert this feedback into investment signals, which the Adviser uses to adjust the ETF's portfolio weightings.
How does the IVAL ETF determine the weightings of its holdings?
The IVAL ETF's portfolio typically includes all securities from its investable universe. The weightings of each security are adjusted based on the feedback data from the Reverberate App. Companies receiving more positive feedback have higher average relative weightings in the ETF, while those with more negative feedback have lower average relative weightings.
What safeguards does the IVAL ETF use to manage risk and ensure meaningful changes in sentiment?
The Adviser employs guardrails, limiting active positions to a maximum of 10% of the market capitalization weight, to manage downside risk. The ETF also uses thresholds, requiring statistically significant changes in sentiment, to ensure meaningful adjustments in portfolio weightings and minimize turnover.