What is DWAW? (Pros, Cons, and Strategies)

If you're looking to diversify your investment portfolio with a global reach while leveraging a tactical investment strategy, you might want to consider the DWAW ETF. The AdvisorShares Dorsey Wright FSM All Cap World ETF (DWAW) is designed to offer an all-world exposure while utilizing a proprietary, time-tested investment strategy. In this blog post, we will explore what DWAW is, its pros and cons, and effective investment strategies.

What is DWAW?

AdvisorShares Dorsey Wright FSM All Cap World ETF, abbreviated as DWAW, is an exchange-traded fund that aims to provide global equity exposure with a tactical investment approach. DWAW is actively managed and leverages the Dorsey Wright's technical research and Fund Score Methodology (FSM) to determine the best investment opportunities across the globe.

The FSM approach focuses on relative strength, evaluating how different asset classes perform relative to each other, aiming to allocate assets to those showing the strongest performance trends.

Key Features of DWAW

• Global Equity Exposure: DWAW invests in a diversified portfolio comprising U.S. and international equities.
• Active Management: It uses a tactical asset allocation strategy based on the relative strength of different markets.
• Fund Score Methodology: The FSM evaluates securities based on their price performance trends to guide investment decisions.

DWAW Composition

DWAW includes a diverse range of stocks from multiple sectors and countries. Unlike typical ETFs that follow a specific index, DWAW's composition is actively adjusted based on the relative strength analysis, offering a more dynamic investment approach. This means that allocations can change significantly depending on the current performance trends across various global markets.

Pros of DWAW

Tactical Investment Strategy

DWAW's tactical investment approach based on the Dorsey Wright FSM allows it to adapt to changing market conditions efficiently. This flexibility can potentially enhance returns by shifting holdings towards stronger performing assets and away from weaker ones.

Global Diversification

DWAW provides exposure to a broad range of equities across different countries and sectors. This global diversification can help mitigate risks associated with market volatility in a single region or sector.

Active Management

The active management feature of DWAW allows for continuous monitoring and rebalancing of the portfolio, potentially capitalizing on emerging trends and minimizing losses during downturns. This is particularly beneficial in volatile or unpredictable markets.

Cons of DWAW

Higher Expense Ratio

One of the primary drawbacks of DWAW is its higher expense ratio due to active management. While the tactical strategy and active management can provide better returns in some scenarios, they also come at a higher cost compared to passively managed ETFs.

Market Timing Risks

The relative strength strategy relies on market timing to some extent, which can pose risks. If the timing is off or if the FSM model fails to predict market trends accurately, the ETF might underperform.

Complexity

DWAW's investment strategy can be complex for average investors to fully understand. The tactical shifts and criteria based on relative strength and other technical factors might not be transparent to all investors, creating a steeper learning curve.

DWAW Investment Strategies

DWAW is ideal for investors seeking to diversify their portfolios with a globally oriented, tactically managed fund. Given its distinctive advantages and risks, it's crucial to employ well-thought-out strategies for investing in DWAW.

Long-Term Investment Strategy

For those looking to hold onto their investments for a substantial period, DWAW can be a valuable addition to a diversified global portfolio. The investment in a mix of high-performing assets globally, backed by a tactical approach, can potentially provide robust returns over the long term.

Dynamic Portfolio Allocation

Given its active management, DWAW can be part of a dynamic portfolio allocation strategy. Investors can use DWAW alongside other investments with a clear understanding of their risk tolerance and investment goals. Regular portfolio reviews and adjustments based on DWAW's performance and market conditions can help optimize returns.

Risk Management

To maximize the benefits of DWAW while mitigating risks, consider balancing DWAW with more stable, low-cost index funds or bonds. This approach can help cushion the impact of potential market timing failures and periods of underperformance inherent to active strategies.

In conclusion, DWAW offers an intriguing opportunity for investors seeking global exposure with a tactical edge. As with any investment, understanding the fund's mechanics, weighing its pros and cons, and deploying effective strategies will be key to leveraging DWAW's potential.

Happy Investing!