Latest news, trends and ideas for investing with exchange traded funds | ETF Commentary

Would you invest in an ETF invented by a famous professor?

That’s the question asked by Ian Salisbury in the article Beware of Professors Bearing ETFs. Salisbury points out that the track record of exchange traded funds based on ivory tower theories have delivered mixed results.

One example is the WisdomTree LargeCap Dividend Fund (DLN), an ETF designed with help from Wharton professor Jeremy Siegel.   DLN has underperformed the SPDR S&P 500 (SPY) and iShares Russell 3000 Index (IWV) over the past three years.

Salisbury also points to Yale economist Robert Schiller and the short-lived MacroShares funds that were supposed to provide exposure to housing prices but failed to gain traction.

The latest ETF with ties to a professor is the United States Commodity Index ETF (USCI) which is based on research by Yale professor Geert Rouwenhorst.

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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:

• 40% iShares Russell 3000 (IWV)
• 20% Vanguard FTSE All-World ex-US ETF (VEU)
• 10% PowerShares DB Commodity Index Tracking Fund (DBC)
• 10% Vanguard FTSE All-Wld ex-US Sm Cp (VSS)
• 10% Vanguard REIT ETF (VNQ)
• 10% WisdomTree SmallCap Earnings Fund (EES)

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Financial Times reporter Rebecca Knight writes that investors who are tired of picking the wrong stocks should switch to exchange traded funds or ETFs.

In her article Passive Route Avoids Stock-Picking Pitfalls , Knight relays the story of a Genworth Financial advisor who moved to a passive strategy in 1995 and advises his clients to do the same.

The advantage of an index is that your portfolio isn’t crippled if one of the stocks suddenly collapses in value.

To assemble a portfolio, the Genworth advisor begins with fixed income and then assembles a core equity portfolio that provides exposure to US stocks using a single “total market” index fund. Examples include SPDR S&P 500 (SPY), Dow Jones U.S. Index Fund (IYY) or the Russell 3000 Index Fund (IWV).

See Investing in the Total Stock Market with ETFs for more information and a complete listing of total market etfs.

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