How To Invest In Freedom $FRDM
One of the largest holdings in my portfolio is $FRDM. This is the Life and Liberty 100 Freedom ETF from Alpha Architects. I want to explain why I think this is the BEST emerging markets ETF.
From the fund website, it markets itself as a fund that invests using a "Freedom-Weighting" strategy.
What this means is it gives a higher weighting to emerging market countries that are freer. One thing you may wonder is how this freedom is measured.
Using these metrics with data provided from the Fraser Institute and Cato Institute $FRDM assigns a "Freedom Score" to each country and weights the portfolio according to the "Most Free."
This is based on the idea that the freer the Emerging Market country the more effective their labor, capital, and overall growth will be.
The fund then takes the top 10 highest scoring countries and allocates them to them based on Freedom Score. Above are the top ten countries held by the fund. This is rebalanced once per year when the numbers from the aforementioned institutions provide their data.
The top ten holdings are determined by market cap. Again this is rebalanced once per year.
Importantly the fund does not invest in any companies where the state owns more than 20% of the enterprise.
One of my favorite aspects of the fund is that it completely excludes countries whose freedom score is too low. Some examples are China, Saudi Arabia, and recently Hong Kong. These countries have no way of making it into the fund.
Currently, there is one fund however the founder Perth Tolle has said that she would be open to creating more "Freedom-Based" ETFs in the future.
Currently, the fund occupies 8% of my total portfolio.
And I just increased my position by another 20% in light of the recent market selloff.
So far the fund has performed fairly well compared to the overall market this year.
This fund along with my japan funds $DXJ and $DXJS make up almost 16% of my total portfolio and almost all of my international exposure.
As always if you want a more complete story I made a full video on the topic a few months back which you can check out here: https://youtu.be/BU1UdiEW30c
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Any concerns about volume liquidity? Avg volume is just 79,000. Bid/ask spread is 14 cents according to Yahoo finance. I know if you have buy with a limit price and are planning to buy and hold this isn't an issue, but I worry about having a large position in these less liquid funds, especially when it's a more volatile one.