An ETF Portfolio for Beating the S&P 500

by: Gary Gordon

Let me reiterate for those who are new to reading my columns. I do not buy-n-hold. And I won’t be buying-n-holding the 7 ETFs in the simple portfolio below.

Nevertheless, the powers-that-be at the largest financial institutions gave S&P 500 forecasts for 2010. And with that… I can’t help but join the jubilee.

The least bullish had a year-end forecast of 0.44% growth. The most bullish? Binky Chadha at Deutsche Bank sees the S&P 500 at 1325 by 12/31, marking a potential 18.8% gain.

Regardless of where the S&P 500 winds up, investors should be able to out-hustle the benchmark on a few simple themes. First, the reflation trade will still be in play. Simply stated, central banks worldwide will not stop the stimulation spigot early. If anything, they will be late.

Second, since the Fed and other central banks will be late, inflation-fighting ETFs will still be winners. And that’s with or without a significant rise in manufacturer or consumer prices.

Third, a major market correction of 10%+ will erode some confidence in the sustainability of the cyclical bull market. Not only will this cause a spike in the CBOE Volatility Index (VIX), but it will create uncertainty surrounding the year-end price on the S&P 500. It follows that the creation of an income stream in one’s portfolio will be critical.

Here, then, is the S&P 500 beating portfolio. Collectively, I anticipate that these 7 ETFs will outperform the index. (Note to naysayers: How about waiting until December 31, 2010!)

Beating the S&P 500 With This Portfolio Of 7 ETFs
% Annual Dividend
JP Morgan Alerian MLP Index (NYSEARCA:AMJ) 6.2%
SPDR Barclay Capital Convertible Bond (NYSEARCA:CWB) 5.0%
iShares S&P Global Communications (NYSEARCA:IXP) 4.0%
Vanguard Emerging Markets (NYSEARCA:VWO) 2.5%
iShares S&P Global Energy (NYSEARCA:IXC) 2.0%
GreenHaven Continuous Commodity Index (NYSEARCA:GCC) 0.0%
Average Income 3.0%
Click to enlarge

Disclosure Statement: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company and/or its clients may hold positions in the ETFs, mutual funds and/or index funds mentioned above. The company does not receive compensation from any of the fund providers covered in this feature. Moreover, the commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities.