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Planning Ahead: Focus on Valuation


What is the biggest concern for advisors today?


ED LOPEZ: I think one of the largest concerns that advisors may have today is valuation. I'm not talking about just valuing growth or other factors, I'm talking about something that transcends that. By valuation I mean the price that you pay for the securities that you invest in. Not the expense ratio of the funds, but of the underlying. We're in a one of the longest bull markets ever. It has gone eight or nine years now, into probably the second longest bull market. You see it in the press every day: Is the market overvalued? Is it going to fall apart again? What we do know is that in the last 18 years there have been at least two major market events where you saw declines of over 40%. And that's a big number to overcome and to recoup.


How should investors plan for the future when the bull market ends and volatility rears its head?


I think that at this juncture, at this time, valuation is an important consideration because, as an advisor, you know you have to invest your clients’ money in equities. They have to be invested in equities, but when do you pull back? If you stay out of the market you're missing a long bull run. But if you put them into the market and allocate it and the market tanks, then that also looks bad. One of the underlying elements in this valuation consideration is the big migration from mutual funds to ETFs. Back in the day, as an advisor you might put somebody in a mutual fund and if that fund or the market tanked, you had somebody to blame. Now you're using ETFs, the market tanks, that allocation decision was yours.


What are examples of the types of ETFs VanEck has launched to help investors?


With this valuation idea in mind, and the potential of coming volatility in the market, VanEck has launched a number of different ETFs. One is our VanEck Vectors Morningstar Wide Moat ETF. This is your “smart shopper” ETF. The ticker symbol: MOAT. It uses proprietary stock selection from Morningstar and then only picks those companies with the best price to fair value ratio. So basically the cheapest, high-quality stocks. That is being a smart shopper. We have not only the U.S. version of that, but we also have an international version, the VanEck Vectors Morningstar International Moat ETF. The ticker: MOTI.


The second solution that we've launched falls into the camp of “Hope for the best, plan for the worst”. This is the VanEck Vectors NDR CMG Long/Flat Allocation ETF. [Ticker: LFEQ] What this ETF has and offers is a rules-based mechanism to provide core equity exposure. You have exposure to S&P 500, but you also have a rules-based process to “step” you out of equities and into cash if the market starts to look weak. It is based on a model developed by Ned Davis Research – hence NDR. It basically stitches together a mosaic of market health, industry by industry. As the market starts to weaken it will step out 80% to equities, 40% to equities, and then zero percent. But it also has that rules-based mechanism to allow you to step back into equities when the time is right, taking out all the emotion.


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IMPORTANT DISCLOSURE


The views and opinions expressed are those of the speaker and are current as of the video’s posting date. Video commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. All performance information is historical and is not a guarantee of future results. For more information about VanEck Funds, VanEck Vectors ETFs or fund performance, visit vaneck.com. Any discussion of specific securities mentioned in the video commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index. Information on holdings, performance and indices can be found at vaneck.com.


The Morningstar® Wide Moat Focus IndexSM and Morningstar® Global ex-US Moat Focus IndexSM were created and are maintained by Morningstar, Inc. Morningstar, Inc. does not sponsor, endorse, issue, sell, or promote the VanEck Vectors® Morningstar Wide Moat ETF or VanEck Vectors® Morningstar International Moat ETF and bears no liability with respect to the ETFs or any security. Morningstar® is a registered trademark of Morningstar, Inc. Morningstar Wide Moat Focus Index and Morningstar Global ex-US Moat Focus Index are service marks of Morningstar, Inc.


The Morningstar® Wide Moat Focus IndexSM consists of U.S. companies identified as having sustainable, competitive advantages and whose stocks are attractively priced, according to Morningstar.


The Morningstar® Global ex-US Moat Focus IndexSM consists of companies outside of the U.S. identified as having sustainable, competitive advantages and whose stocks are attractively priced, according to Morningstar.


An investment in VanEck Vectors Morningstar Wide Moat ETF (MOAT®) may be subject to risks which include, among others, investing in the health care, consumer discretionary, industrials, information technology and financial services sectors, medium-capitalization companies, equity securities, market, operational, high portfolio turnover, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, replication management, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversified, and concentration risks, which may make these investments volatile in price or difficult to trade. Medium-capitalization companies may be subject to elevated risks. The Fund's assets may be concentrated in a particular sector and may be subject to more risk than investments in a diverse group of sectors.


An investment in VanEck Vectors Morningstar International Moat ETF (MOTI®) may be subject to risks which include, among others, equity securities, investing in the financial services and consumer discretionary sectors, medium-capitalization companies, foreign securities, foreign currency, emerging market issuers, special risk considerations of investing in European, Asian and Australian issuers, depositary receipts, cash transactions, market, operational, high portfolio turnover, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, replication management, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversified, and concentration risks, which may make these investments volatile in price or difficult to trade. Foreign investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates which may negatively impact the Fund's returns. Medium-capitalization companies may be subject to elevated risks. The Fund's assets may be concentrated in a particular sector and may be subject to more risk than investments in a diverse group of sectors.


VanEck Vectors® NDR CMG Long/Flat Allocation ETF (LFEQ) provides risk-managed exposure to S&P 500 equites using multiple technical indicators that help determine when to be in the market and by how much. The Fund seeks to track the Ned Davis Research CMG US Large Cap Long/Flat Index, designed by Ned Davis Research, Inc. (NDR) and CMG Capital Management Group, Inc. (CMG). The Fund is subject to risks associated with equity risk, index tracking risk, risk of investing in other funds, risk of U.S. Treasury bills, market risk, and concentration risk. The Fund is considered non-diversified and may be subject to greater risks than a diversified fund.


LFEQ is not sponsored, endorsed, sold or promoted by Ned Davis Research, Inc. ("NDR") or CMG Capital Management Group, Inc. ("CMG"). NDR and CMG make no representation or warranty, express or implied, to the owners of the Fund or any member of the public regarding the advisability of investing in securities generally or in the Fund particularly or the ability of the Index to track the performance of equities market.


NEITHER NDR NOR CMG GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN AND NEITHER NDR NOR CMG SHALL HAVE ANY LIABILITY WHATSOEVER FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. NDR AND CMG MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN. NDR AND CMG MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL NDR OR CMG HAVE ANY LIABILITY, JOINTLY OR SEVERALLY, FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.


Fair value estimate: the Morningstar analyst's estimate of what a stock is worth. Price/Fair Value: ratio of a stock's trading price to its fair value estimate.


Indexes are unmanaged and are not securities in which an investment can be made.


S&P 500® Index consists of 500 widely held common stocks covering industrial, utility, financial and transportation sector; as an index, it is unmanaged and is not a security in which investments can be made.


The S&P 500 Index ("Index") is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Van Eck Associates Corporation. Copyright © 2017 S&P Dow Jones Indices LLC, a division of S&P Global, Inc., and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC's indices please visit www.spdji.com. S&P is a registered trademark of S&P Global and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third-party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third-party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.


Fund shares are not individually redeemable and will be issued and redeemed at their Net Asset Value (NAV) only through certain authorized broker-dealers in large, specified blocks of shares called "creation units" and otherwise can be bought and sold only through exchange trading. Shares may trade at a premium or discount to their NAV in the secondary market. You will incur brokerage expenses when trading Fund shares in the secondary market. Past performance is no guarantee of future results.


Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a fund carefully before investing. To obtain a prospectus and summary prospectus which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.


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