ETF Innovators - How Touchstone is Creating a Fresh Perspective on Global Investing with the Touchstone Dynamic International ETF (TDI)
Looking beyond U.S. borders offers tremendous lucrative potential, as highlighted by Hal Reynolds in his discussion of the Touchstone Dynamic International ETF (TDI).
This flexible investment vehicle adopts a forward-looking strategy that breaks free from rigid value or growth categorizations, allowing it to adapt to evolving market conditions across different regions.
Unlike many competitors, TDI employs a bottom-up approach, identifying exceptional companies regardless of their location while avoiding the concentration risks prevalent in U.S. markets dominated by mega-cap stocks. Reynolds emphasizes their three-pillar methodology: seeking great operators, attractive discount rates, and positive fundamental momentum—effectively sidestepping potential value traps where seemingly cheap stocks have deteriorating fundamentals.
The fund's approach to diversification spans global markets and industries, providing balanced exposure that Reynolds notes is particularly valuable given international markets' relatively inefficient pricing. But rather than chasing price-based momentum, TDI focuses on fundamental momentum, ensuring price increases are supported by robust business performance.
Currency risk management features prominently in TDI's strategy, with Reynolds cautioning that diverging central bank policies may create greater currency volatility than seen in recent years. The fund incorporates this risk by analyzing revenue sources and cost structures of portfolio companies.
Reynolds makes a compelling valuation case, noting non-U.S. equities trade at approximately one-third cheaper than their American counterparts, while hosting many world-leading companies across pharmaceuticals, automotive, and energy sectors. He warns that competition will eventually compress the high profit margins currently enjoyed by expensive U.S. technology companies.
For financial advisors, TDI offers both strategic allocation potential and tactical flexibility with its diverse portfolio of over 120 securities. Reynolds suggests its active management approach will prove particularly valuable as monetary stimulus fades and the performance gap between winning and losing companies potentially widens.
Learn more about TDI here: https://tinyurl.com/5n6mb57y