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Summary

  • I detail the performance of my ETF portfolio I created in response to a CNBC ETF portfolio.
  • Based on the performance, I decided to make some minor changes to my ETF portfolio.
  • I also look at the changes made to the CNBC portfolio over the last year.

In this article, I will be conducting a one-year review of an article I wrote last year about improving an ETF portfolio constructed by CNBC last year for someone who was around 50 years old. The main thing I found last year when analyzing the CNBC portfolio was that many of the funds had a high correlation to each other. I concluded that the best way to fix this was to replace some ETFs in the portfolio with lower-correlated ETFs, and because of these redundancies, I was able to cut out some funds and reduce transaction costs. In the first table below is the portfolio that was constructed by the CNBC ETF advisory council, and the second table shows the portfolio that I constructed.

CNBC Portfolio

TypeSymbolFund Name
Weight

Cash

(NYSEARCA:GSY)

Guggenheim Enhanced Short Duration Bond

5.00%

Equity

(NYSEARCA:SPY)

SPDR S&P 500

12.50%

Equity

(NYSEARCA:SCHD)

Schwab U.S. Dividend Equity

5.00%

Equity

(NYSEARCA:VO)

Vanguard Mid Cap

5.00%

Equity

(NYSEARCA:FXH)

First Trust Health Care AlphaDEX

2.50%

Equity

(NYSEARCA:VEU)

Vanguard FTSE All-World ex-US

12.50%

Equity

(NYSEARCA:DEM)

WisdomTree Emerging Markets Equity Income

5.00%

Equity

(NYSEARCA:ECON)

EGShares Emerging Markets Consumer Titans

2.50%

Equity

(NYSEARCA:IDLV)

PowerShares S&P International Low Volatility

5.00%

Bonds

(NYSEARCA:AGG)

iShares Core Total U.S. Bond Market

10.00%

Bonds

(NYSEARCA:LQD)

iShares iBoxx $ Investment Grade Corp Bond

5.00%

Bonds

(NYSEARCA:ELD)

WisdomTree Emerging Markets Local Debt

5.00%

Opportunity

(NYSEARCA:BKLN)

PowerShares Senior Loan Portfolio

5.00%

Opportunity

(NYSEARCA:GDX)

Market Vectors Gold Miners

5.00%

Opportunity

(NASDAQ:VNQI)

Vanguard Global ex-US Real Estate

5.00%

Opportunity

(NYSEARCA:HYLD)

Peritus High Yield

5.00%

Opportunity

(NYSEARCA:UUP)

PowerShares DB US Dollar Index Bullish

5.00%

My Portfolio

CASH

GSY

Guggenheim Enhanced Short Dur Bond ETF

5.00%

Equity

(NYSEARCA:SDOG)

ALPS Sector Dividend Dogs ETF

20.00%

Equity

(NYSEARCA:AMJ)

JPMorgan Alerian MLP Index ETN

5.00%

Equity

(NYSEARCA:DVYE)

iShares Emerging Markets Dividend

10.00%

Equity

IDLV

PowerShares S&P Intl Dev Low Volatility

15.00%

Bonds

AGG

iShares Core Total US Bond Market ETF

10.00%

Bonds

(NASDAQ:VCSH)

Vanguard Short-Term Corp Bd Idx ETF

10.00%

Bonds

ELD

WisdomTree Emerging Markets Local Debt

10.00%

Opportunity

VNQI

Vanguard Global ex-US Real Estate ETF

5.00%

Opportunity

(NYSEARCA:GLD)

SPDR Gold Shares

5.00%

Opportunity

HYLD

Peritus High Yield ETF

5.00%

One-Year Results

To compare the results, I constructed a hypothetical $100K portfolio for each, and tried to make it as close to reality as possible. The assumptions I used were that there were no fractional shares when purchasing a stock, and I included commissions of $9.99 for ETF. The first table below shows the CNBC portfolio, with the total return for each fund and the overall performance of the portfolio over the past year. For total return data, I used the dividendchannel.com DRIP returns calculator.

CNBC Portfolio

Symbol

Weight

Shares

Starting Value

Total Return

Ending Value

GSY

5.00%

90

$4,520.70

1.17%

$4,573.59

SPY

12.50%

70

$11,116.00

16.61%

$12,962.37

SCHD

5.00%

150

$4,836.00

15.56%

$5,588.48

VO

5.00%

50

$4,670.00

18.13%

$5,516.67

FXH

2.50%

60

$2,329.20

23.05%

$2,866.08

VEU

12.50%

260

$12,196.60

10.22%

$13,443.09

DEM

5.00%

90

$4,905.00

-4.30%

$4,694.09

ECON

2.50%

90

$2,409.30

1.94%

$2,456.04

IDLV

5.00%

160

$4,952.00

6.87%

$5,292.20

AGG

10.00%

80

$8,896.00

-0.29%

$8,870.20

LQD

5.00%

40

$4,857.20

0.66%

$4,889.26

ELD

5.00%

90

$4,822.20

-10.09%

$4,335.64

BKLN

5.00%

190

$4,784.20

2.49%

$4,903.33

GDX

5.00%

150

$4,833.00

-24.13%

$3,666.80

VNQI

5.00%

80

$4,799.20

-5.74%

$4,523.73

HYLD

5.00%

90

$4,655.70

10.15%

$5,128.25

UUP

5.00%

220

$4,914.80

-4.79%

$4,679.38

Starting Value of Investments

$94,497.10

Ending Value of Investments

$98,389.20

Starting Portfolio Value

$100,000.00

Commissions

$169.83

Cash [100K-Commission-Value of Invest]

$5,333.07

Ending Value [Investments + Cash]

$103,722.27

Return

3.72%

My Portfolio

Symbol

Weight

Shares

Starting Value

Total Return

Ending Value

GSY

5.00%

90

$4,520.70

1.17%

$4,573.59

SDOG

20.00%

650

$19,864.00

16.72%

$23,185.26

AMJ

5.00%

100

$4,554.00

9.58%

$4,990.27

DVYE

10.00%

180

$9,561.60

-3.52%

$9,225.03

IDLV

15.00%

480

$14,856.00

6.87%

$15,876.61

AGG

10.00%

80

$8,896.00

-0.29%

$8,870.20

VCSH

10.00%

120

$9,658.80

1.71%

$9,823.97

ELD

10.00%

180

$9,644.40

-10.09%

$8,671.28

VNQI

5.00%

80

$4,799.20

-5.74%

$4,523.73

GLD

5.00%

30

$4,302.90

-11.82%

$3,794.30

HYLD

5.00%

90

$4,655.70

10.15%

$5,128.25

Starting Value of Investments

$95,313.30

Ending Value of Investments

$98,662.49

Starting Portfolio Value

$100,000.00

Commissions

-$109.89

Cash[100K-Commission-Value of Invest]

$4,576.81

Ending Value [Investments + Cash]

$103,239.30

Return

3.24%

Review of results

I believe my portfolio performed very well and closely matched the performance of the CNBC portfolio, however, my portfolio did slightly underperform the CNBC portfolio by 0.48%. The reason the CNBC portfolio outperformed mine was because of its allocation to mid-cap stocks and healthcare stocks. In my original article, I concluded that VO and FXH had too high of correlation to other funds in the portfolio, therefore, I excluded VO and replaced it by adding to my allocation of SDOG, and I replaced FXH with AMJ, because AMJ had a lower correlation to other funds in the portfolio. In the beginning of 2013, low volatility and dividends were the name of the game, and replacing those two funds seemed like a good strategy. However, when interest rates starting rising in May on word of the taper, anything dividend-related lagged, and small, mid-cap & healthcare stocks led the market higher. By my portfolio having only an allocation to only large-cap stocks, I missed the outperformance of small and mid-cap companies, which is something that I will be covering as part of the changes to the portfolio below.

Portfolio Changes

Based on the results and new ETF products on the market, there are a couple changes that I will be making to the portfolio.

Change #1: Adding an allocation to Mid & Small Cap Stocks

The first change I will be making is that I will be reducing my allocation of SDOG to 15%, and starting a new position in the Vanguard Extended Market Index ETF (NYSEARCA:VXF). The reason why I chose to add VXF to the portfolio was VXF holds an allocation of 49% in mid-cap stocks, 31.35% in small-cap stocks, 12.97% in micro-cap stocks, which totals 93.32%, and the remaining 6.68% is allocated to large-cap stocks. VXF should provide the added market-cap diversification that my portfolio was lacking in the last year.

Change #2: Replace GLD with an allocation to Income-generating gold fund

One of the things that I did not like about my portfolio was that GLD did not pay any dividends, and I am a big proponent of the value of dividends. This is where my replacement fund comes in to play; the Credit Suisse Gold Shares Covered Call ETN (NASDAQ:GLDI) owns shares of GLD, and writes covered calls on those shares to generate income. The fund was very new at the time of writing my article, so it was not proven, but now it has a longer record, and I have been able compare it to GLD to see how it compares. Since the time of my article in April 2013, GLD has returned -11.82%, and over that same period, GLDI has had a total return of -10.37%, which is an outperformance of 1.5%. With the fund's focus on income generation, while still having an allocation to GLD, this seems like a good choice to replace just a simple long position in GLD.

CNBC Portfolio Changes

The last time CNBC updated their portfolio was July 2013, and they made five changes to their portfolio, they completely removed the allocation to cash (GSY), the dollar (UUP), healthcare stocks (FXH), and Emerging Markets dividends (DEM). The new portfolio additions are shown in the table below with the accompanying weight:

Symbol

Description

Weight

(NYSEARCA:XLK)

Technology Select Sector SPDR ETF

5.00%

(NYSEARCA:DBEF)

db X-trackers MSCI EAFE Hedged Equity ETF

12.50%

(NYSEARCA:DXJ)

WisdomTree Japan Hedged Equity ETF

5.00%

(NASDAQ:EUFN)

iShares MSCI Europe Financials Sector Index ETF

5.00%

(NYSEARCA:CSJ)

iShares 1-3 Year Credit Bond ETF

5.00%

Closing thoughts

I believe my portfolio performed as I designed it, and the slight underperformance I believe will be fixed by the two changes that I have made. The changes I made totaled only 10% of the overall portfolio, which I believe, is reasonable, but the CNBC portfolio had five new additions, which totaled 32.5% of their portfolio. This change of nearly a third of the portfolio is massive, and it adds to the cost of transactions and the time it takes to manage the portfolio. One of my goals was to decrease transaction costs and portfolio maintenance, which I have accomplished. In closing, I believe my portfolio is diversified, generates income, and minimizes transaction costs & portfolio maintenance for someone who is around 50 years old.

Disclaimer

Source: My CNBC ETF Portfolio One-Year Review