3 Underrated ETFs to Watch in 2023

Avantis All Equity Markets ETF (AVGE)

Avantis Investors quickly grew to become a household name when it comes to factor investing, particularly for their small-cap, value, and small-cap value ETFs. In September 2022 Avantis launched AVGE, which I consider to be a landmark moment in the factor investing space.

Before AVGE, factor investors relying on ETFs had to cobble together a portfolio using a variety of ETFs. AVGE solves this problem using a fund-of-fund structure that includes 10 underlying Avantis ETFs, including U.S. equity, international equity, value, small-cap, small-cap value, and real estate.

The biggest benefit of this approach is total simplicity. Investors can now rely on Avantis to rebalance and manage holdings on their behalf, for a reasonable net expense ratio of 0.23%. So far, AVGE has attracted around $74 million in AUM.

WisdomTree Efficient Gold Plus Equity Strategy Fund (GDE)

GDE is a unique ETF that relies on the "return stacking" strategy, also known as "capital-efficient investing" if you're a pension officer. Essentially, this ETF uses gold futures to provide investors with a leveraged 90/90 stocks/gold portfolio in a single ticker solution.

Here's how it works: 90% of the ETF's capital is invested in large-cap U.S. equities similar to the S&P 500. The remaining 10% is held in cash as collateral for gold futures with 9x notional exposure. Hence, a 90/90 allocation for a total 1.8x leverage that is intended to be held long-term.

Investors can use GDE as a higher risk portfolio on its own or combine it with other ETFs to provide greater diversification while still maintaining a sizable equity and gold allocation. For instance, holding 67% GDE would give you a 60/60 equity/gold allocation, while leaving 33% free for additional assets.

LifeGoal Wealth Builder ETF (WLTH)

I'm a big fan of asset allocation ETFs, which are products that combine multiple different assets like stocks, bonds, and alternatives into a single-ticker-managed solution. They're a great hands-off option for investors who don’t want to worry about managing a portfolio.

An overlooked but novel ETF in this space is WLTH, which is possibly the most diversified asset allocation ETF I've seen so far. While most asset allocation ETFs opt for the usual combination of U.S. and international stocks and bonds, WLTH takes it a few steps further.

On the stock side, WLTH holds U.S. and international stocks directly and via other ETFs, targeting dividend growth, minimum volatility, and covered call income strategies. It also holds global materials and real estate ETFs. There are also allocations to treasury, corporate, TIPS, municipal, and emerging market bonds of all maturities, as well as a small allocation to broad commodities and gold.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.