A model portfolio for Sand Hill Advisors uses both mutual funds and ETFs to allocate across asset classes and geographies.
As the investment firm braces for higher interest rates by paring back on fixed-income exposure, the managers retain 4% of the portfolio in the iShares Barclays TIPS Bond Fund (TIP). For mid-cap exposure, the firm allocates 5% of the portfolio to the iShares S&P MidCap 400 ETF (IJH).
As the popularity of exchange traded funds continues to grow, more advisors are offering model ETF portfolios as a service.
Forbes‘ Richard Ferri takes a look at this trend in his recent article The Next Big Thing: Model ETF Portfolios. Ferri offers his own “Core Four” portfolio solution that includes an all-Vanguard line-up:
Total Stock Market ETF (VTI )
FTSE All-World ex-US ETF (VEU )
REIT ETF (VNQ)
Total Bond Market ETF (BND)
Kiplinger’s Jeffrey Kosnett recently published a primer on investing with Exchange Traded Funds and included a list of 10 ETFs that you need to know.
The funds making Kosnett’s 10 “to know” list include:
SPDR Barclays Capital High Yield Bond ETF (JNK)
iShares S&P-Citigroup International Treasury Bond Fund (IGOV)
S&P Global Utilities Sector Index Fund (JXI)
iBoxx $ Investment Grade Corporate Bond Fund (LQD)
Investment adviser Steven Goldberg provides his picks for the top exchange traded funds for 2010 on Kiplinger.com.
Goldberg belives that the market will reward shares of the biggest and strongest companies this year and, within that category, the faster growers among them.
Goldberg’s ETF portfolio for 2010 includes:
55% Vanguard Total Stock Market ETF (VTI)
10% Vanguard Mega Cap 300 Growth ETF (MGK)
20% Vanguard Europe Pacific ETF (VEA)
10% Vanguard Emerging Markets Stock ETF (VWO)
5% Vanguard REIT Index ETF (VNQ)
For more diversification, Goldberg recommends adding bonds with funds such as:
SPDR Barclays Aggregate Bond (LAG)
iShares S&P National AMT-Free Municipal Bond (MUB)
In the column ETF Portfolios for Every Purpose, Kiplinger’s Jeffrey Kosnett recently outlined a series of all ETF portfolios with the idea that you can pursue any goal with nothing more than exchange-traded funds.
Kosnett’s all ETF Growth and Income portfolio includes these funds:
Kiplinger’s Jeffrey Kosnett has put together several model portfolios with the idea that you can pursue any goal with nothing more than exchange traded funds.
Kosnett’s equity-only portfolio is designed for investors who have a healthy tolerance for risk and are investing for long-term growth. The portfolio includes 90% equity ETFs and 10% commodity ETFs:
In the article How to Build a Portfolio Wisely and Safely, the WSJ’s Jeff Opdyke presents three approaches to building a portfolio in a time of great uncertainty.
For investors looking to protect portfolios against inflation, Opdyke recommends treasury inflation-protected securities or TIPS since their principal adjusts upward along with inflation.
Altough Opdyke mentions Vanguard’s TIPS fund, the SPDR Barclays Capital TIPS ETF (IPE) is a better deal for investors. For more on inflation investing, see the TIPS Fixed Income ETF Directory.
For optimistic investors, Opdyke suggests the Vanguard Total International Stock Index Fund. The ETF equivalent is the Vanguard FTSE All-World ex-US ETF (VEU).
In case the “Goldilocks” outlook turns out be wrong, taking out insurance in the form of cash, long-term treasurys and a commodity ETF such as the DB Commodity Index Tracking Fund (DBC) is not a bad idea.
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The severe bear market is providing investors a rare opportunity to remake their portfolios while incurring little or no capital gains taxes.
In the article It’s a Great Time for a Makeover, New York Times contributor Paul Lim relays advice from financial planners that now is the time for investors to think about overhauling their portfolios. The current bear market has wiped out gains from the past 10 years leaving many people in a position where they would have little or no taxes to pay from selling existing holdings.
In particular, advisors are recommending to diversify portfolios while lowering expenses. Foreign stocks and real estate had been relatively expensive before the markets began their slide. Now foreign stocks trade at a P/E of 10, down from 14 in 2007. Real estate investment trusts or REITs are down 40%.
Investors can lower expenses by shifting out of stocks, bonds and mutual funds and into exchange traded funds. ETFs offer instant diversification at a much lower cost than the typical actively managed mutual fund. Lim suggests looking at iShares S&P 500 (IVV) , an ETF with an expense ratio of 0.09%.
ETFs that offer exposure to REITs include the FTSE NAREIT Industrial/Office Index Fund (FIO) and Cohen & Steers Realty Majors (ICF). For more on real estate, see Investing in REITs with ETFs.
ETFs that provide broad access to foreign stocks include the MSCI EAFE Index Fund (EFA) and Vanguard FTSE All-World ex-US ETF (VEU). For a complete listing, see the International ETF Directory.
Forbes magazine recently tasked their investor panel with the challenge of coming up with sectors and ETFs to buy and hold in anticipation of the next up cycle.
In the article Funds to Hold Through 2014, David Serchuk cites the chief investment strategist for Deutsche Bank’s DWS Securities who is looking for the Dow to hit an all-time high within the next 5 years. He believes that the coming global boom is likely to benefit financials, energy, materials, industrials and technology the most.
ETFs that provide exposure to these sectors include the iShares S&P Global Energy Sector Index Fund (IXC) and Vanguard Energy ETF (VDE) for energy. For financials, the Forbes panel likes iShares S&P Global Financial Sector Index ETF (IXG) and the Vanguard Financials ETF (VFH).
Technology ETFs mentioned include the iShares S&P Global Technology Sector Index Fund (IXN), Vanguard Information Technology ETF (VGT) and the Vanguard Telecommunications Services ETF (VOX).
Also highlighted – the Vanguard Industrials ETF (VIS) and the Vanguard Materials ETF (VAW).
Money Magazine’s undercover financial planner recently answered the question How to Make Money in ETFs (and how not to).
The undercover planner believes that financial advisers are not big fans of ETFs and regard them as a threat. With ETFs, individual investors can create a simple, low-cost portfolio that beats the pants off professionally designed plans. Why pay advisors 1.5% to 2% a year to do something that you could manage yourself?
The Mole recommends using ETFs that own the whole market at the lowest cost and have the greatest tax efficiency such as Vanguard Total Stock Market (VTI), Vanguard FTSE All-World Ex-U.S. (VEU) and Vanguard Total Bond (BND).
