While it is almost a given that one include large-cap U.S. Equities using SPDR S&P 500 Trust ETF (NYSEARCA:SPY) or Vanguard Total Stock Market VIPERs ETF (NYSEARCA:VTI) in a portfolio, it is not necessary. What if one avoids big-cap stocks and places an emphasis on mid-cap companies? In addition, overload emerging markets while holding a lower percentage in developed international markets.
The following asset allocation plan does just that. Twenty percent of the portfolio is allocated to iShares Russell 2000 Index ETF (NYSEARCA:IWM). Fifty percent more is assigned to Vanguard Emerging Markets Stock VIPERs ETF (NYSEARCA:VWO) than Vanguard FTSE All-World ex-US ETF (NYSEARCA:VEU).
In the following portfolio, nothing is allocated to PowerShares DB Commodity Index Tracking ETF (NYSEARCA:DBC) and ProShares UltraShort S&P 500 ETF (NYSEARCA:SDS), but they are included for future investments. SDS is available when the manager sees fit to move 5% points (or more) from IWM to SDS. This move will definitely raise the Diversification Metric percentage and pull down the projected standard deviation.
This portfolio meets specific goals.
- The projected return exceeds that projected return for the S&P 500 by more than one percentage point. In this portfolio, that value is 8.1%.
- The projected standard deviation comes in under 15%. As readers can see, the value is 13.5%.
- The Diversification Metric exceeds 40%. This portfolio plan falls 2% points below the goal, but that difference is easily overcome by shifting a few percentage points to SDS.
- The Return/Volatility ratio should be greater than 0.60. This portfolio just meets that standard.
Providing low correlation investments are SPDR Barclays International Treasury Bond ETF (NYSEARCA:BWX), iShares Barclays 7-10 Year Treasury Bond ETF (NYSEARCA:IEF), and iShares Barclays 20+ Year Treasury Bond ETF (NYSEARCA:TLT). Waiting in the wings for the proper market is SDS.
Investors seeking a simple portfolio will find this mix of eleven ETFs meet that requirement.