401K News - July 2020

Aspetuck Financial Management is replacing two of the ETF options in the 401k lineup with new ETFs in the third quarter. The changes in ETFs involve your U.S. Small-cap option and your U.S. Large-cap Dividend paying option.

The Small-cap change will increase the quality of small-cap stocks owned. When the market enters a down market before a recession, it is better to own more profitable companies that have better fundamentals than those that are not profitable and have too much debt, etc. The replacement U.S. Small-cap ETF invests in only profitable small-cap stocks.

SPDR® Portfolio S&P 600 Small Cap ETF (symbol SPSM) is being replaced by iShares Core S&P Small-Cap ETF NYSE (symbol IJR). The iShares Core S&P Small-Cap is an ETF investment that seeks to track the investment results of the S&P SmallCap 600 (the "underlying index"), which measures the performance of the small-capitalization sector of the U.S. equity market. The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index. It may invest the remainder of its assets in certain futures, options and swap contracts, cash and cash equivalents, as well as in securities not included in the underlying index, but which the advisor believes will help the fund track the underlying index. Expense Ratio (Net) 0.07%.

The Large-cap dividend paying ETF change will increase the quality of large-cap stocks owned. Again, in down market before a recession, its better to own higher quality companies with stronger balance sheets.

The SPDR® Portfolio S&P 500 High Dividend ETF (symbol SPYD) is being replace by the Vanguard Dividend Appreciation Index Fund ETF (symbol VIG). The Vanguard Dividend Appreciation Index Fund ETF seeks to track the performance of a benchmark index that measures the investment return of common stocks of companies that have a record of increasing dividends over time. The fund employs an indexing investment approach designed to track the performance of the Nasdaq US Dividend Achievers Select Index, which consists of common stocks of companies that have a record of increasing dividends over time. The adviser attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index. Expense Ratio (Net) 0.06%.

Plan participants are not required to take any action. The changes mentioned are automatic for all Tactical Model portfolios.