Heads Down, Mouths Shut: The Distracted Generation

Heads Down, Mouths Shut: The Distracted Generation

To say there is a lot going on in the world right now is probably an understatement. The current events of the moment are so cumbersome and so complex that for many it has become emotionally and physically taxing.


The interesting thing about the emotion piece is that most of us are walking around unable to muster up emotion for anyone or anything that doesn’t directly affect our own lives. That is to say that we would rather lose ourselves in the joy of Beyonce’s pregnancy or the latest You Tube video of someone making a fool of themselves in an effort to ignore and/or not fully participate in the more pressing issues of the moment. As an avid watcher of the hit show: The Walking Dead, I am more and more convinced that our story – like the show will never be about the zombies or the villains who destroyed humanity; but rather the human beings that were so out of touch with reality that they allowed it to happen.

Of course there will be the bunch who say: “I can enjoy pop culture and be just as socially vigilant as the next soldier”. Sure you can. I will not deny you your joy. Lose yourself. However, I will wager you that the people dying in Aleppo have no distractions; nothing to divert their attention from the daily horror of their own lives. The biggest diversion those poor people have is the pain of losing loved ones, the periodic pleas over social media to save them, and the hunger pangs plaguing them for weeks at a time.

Do you think the people of Flint, Michigan have the luxury of caring about pop culture or the latest viral video when they are going on their third year of having lead-ridden water to drink, cook, and bathe with?

What freedom to divert attention do the people of Pinellas County, Florida have as 95% of their students continue to fail reading and writing with a white-run board of education who prides themselves on incarcerating young black children for minor offenses?

Enjoy your diversions, your bubbles, and all of the things that make you comfortable and happy daily. I simply hope that the freedom to enjoy those things is never taken away from you. I hope you never have to become invisible to a whole society of people who value their diversions more than your well-being.

I hope that you never encounter an injustice so horrible that people leave you to cope in deafening silence, because they are afraid to lose what little has been afforded them.

By all means, keep your head down at that job where you can’t seem to make strides, but affords you a regular check. Keep your mouth shut so as to not stir your friends, family and professional network – I’m sure they will all come to your rescue should misfortune befall you.

Personally, I cannot keep my head down. I will not keep quiet. I have watched enough atrocities to know that I am quite fortunate and at any moment it can all be taken away from me. Nothing that is granted is indefinite. I know enough to know that I cannot cure all of society’s ills, but I know that to not step up and lend a hand is a moral sin.

As we all continue to watch many of the constructs of society and government crumble before us, we need to ask ourselves whether we are going to be proactive and do our part; or wait until misfortune hits closer to home to snap out of it and into action.

Please know the goal has always been for each of us to be so wrapped up in self-preservation, survival and distractions that we remain oblivious to all of the underhanded things going on right under our noses.

If you want to know what’s going on you merely have to stop and pay attention to what is going on and the connectivity of each event. Enjoy the glimmers of beauty still present for our enjoyment regularly; but please also recognize that your ability to enjoy those moments is a privilege many do not have.

Ultimately it is your choice to stay abreast or to live in ignorance. Choose wisely.

Janine Truitt
WorkForce
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Janine’s career spans ten years in HR and Talent Acquisition. She is a dynamic speaker, entrepreneur and an important voice bringing business savvy to the discipline of HR. ... Click for full bio

Building a Better Index With Strategic Beta

Building a Better Index With Strategic Beta

Written by: Yazann Romahi, Chief Investment Officer of Quantitative Beta Strategies and Lead Portfolio Manager of JPMorgan Diversified Return International Equity ETF at J.P. Morgan Asset Management

With the global economy warming up, but political uncertainty remaining a constant, it’s more important than ever for investors to position their global portfolios to navigate long-term market volatility. That’s where the power of diversification comes in, says Yazann Romahi, Chief Investment Officer of Quantitative Beta Strategies at J.P. Morgan Asset Management and Lead Portfolio Manager of JPMorgan Diversified Return International Equity ETF (JPIN).

Not all diversified portfolios are alike  


In their search for diversification, many investors turn to passive index ETFs, which track a market cap-weighted index. But these funds aren’t always the most effective way to steer a steady course through volatile markets—and there are two key reasons why.

First, traditional market cap-weighted indices are actually less diversified than investors may think. For example, in the S&P 500, the top 10% of stocks account for half the volatility of the index. Within sectors, while you might assume that sector risk is distributed across the ten major sectors fairly evenly, it is a surprise to many that at any point in time, one sector can be as high as 50% of the risk.

Second, cap-weighted indices come with some inherent weaknesses, including exposure to unrewarded risk concentrations and overvalued securities. So, while these indices provide investors with exposure to the equity risk premium and long-term capital growth, as is the case with any other investment, investors can also experience painful downturns, which increase volatility and reduce long-term performance. For investors seeking equity exposure with broader diversification—and potentially lower volatility—strategic beta indices may be better positioned to deliver the goods.

How do we define strategic beta?


Strategic beta refers to a growing group of indices and the investment products that track them. Most of these indices ultimately aim to enhance returns or reduce risk relative to a traditional market cap-weighted benchmark.

Building on decades of proven research and insights, J.P. Morgan’s strategic beta ETFs track diversified factor indices designed to capture most of the market upside, while providing less volatility in down markets compared to a market cap-weighted index. Rather than constructing an index based on market capitalization—with the largest regions, sectors and companies representing the largest portion of the index—our strategic beta indices aim to allocate based on maximizing diversification along every dimension—sectors, regions and factors. The index therefore seeks to improve risk-adjusted returns by tackling the overexposure to risk concentrations and overvalued securities that come as part of the package with traditional passive index investing.

So, how do you build a better index?


As one of just a few ETF providers that combine alternatively-weighted and factor-oriented indices, our disciplined index methodology is designed to target better risk-adjusted returns through a two-step process.

First, we seek to maximize diversification across the risk dimension. This essentially means that we look to ensure risk is more evenly spread across regions and sectors, which balances the index’s inherent concentrations. As uncontrolled risk concentrations are unlikely to be rewarded over the longer term, we believe investors should strive for maximum diversification when constructing a core equity exposure.

Second, we seek to maximize diversification across the return dimension. Research shows that there are a number of sources of equity returns beyond growth itself. These include risk exposures such as value, size, momentum and quality (or low volatility). When creating a diversified factor index in partnership with FTSE Russell, we seek to build up the constituents with exposure to these factors. We therefore select securities through a bottom-up stock filter, scoring each company based on a combination of these return factors to determine whether it is included in the index. These factors provide access to a broader, more diversifying source of equity returns as they inherently deliver low correlation to one another, providing diversification in the return dimension.

So, whereas traditional passive indices allow market cap to dictate allocations, the diversified factor index seeks to ensure that we minimize concentration to any source of risk—whether it be region, sector or source of return.

How are you currently weighted versus the market cap-weighted index, and how have your under-   and over-weights enhanced risk-return profiles?


Crucially, our weightings don’t reflect specific views on sectors or regions and are instead, by design, the point of maximal diversification. It is important to remember that market cap-weighted indices typically carry a lot of concentration risk—for example, at various points in time, a single sector can explain half the risk of the index when left unmanaged. At the moment, three sectors explain two-thirds of the risk of the FTSE Developed ex-NA Index—these being financials, consumer goods and industrials. In contrast, the FTSE Developed ex-NA Diversified Factor Index—or strategic beta index, which JPMorgan Diversified Return International Equity ETF (JPIN) tracks—is explicitly designed to maintain balance and therefore these sector allocations range from 8% to 12%. In the short term, any concentrated portfolio can of course outperform a more diversified one, if the concentrated bet paid off.

Investing wholly in a single stock may outperform over short-term periods. At other times, it may significantly underperform an index. However, it is well understood that an investor is better off diversifying across lots of stocks for better risk-adjusted long-term gains. The same applies here. From a pure return perspective, if financials, for example, account for half of a cap-weighted index in terms of market cap and have a strong run over the short term, of course, this index would outperform over this period. Over the long run, however, it is fairly uncontroversial to suggest that the more broadly diversified index could achieve better risk-adjusted returns.

Seeking a smoother ride in international equity markets?


For investors targeting enhanced diversification through a core international equity portfolio, JPMorgan Diversified Return International Equity ETF (JPIN) targets lower volatility by tracking an index that more evenly distributes risk, enabling them to get invested—and stay invested.

Learn more about JPIN and J.P. Morgan’s suite of strategic beta ETFs here.

Call 1-844-4JPM-ETF or visit www.jpmorganetfs.com to obtain a prospectus. Carefully consider the investment objectives and risks as well as charges and expenses of the ETF before investing. The summary and full prospectuses contain this and other information about the ETF. Read them carefully before investing.

 

J.P. Morgan Asset Management
Empowering Better Decisions
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See how ETFs differ from other investment vehicles, learn how to evaluate them, and discover how ETFs can be used effectively to achieve a diversity of investment strategies. ... Click for full bio