Two Model Portfolios Using ETFs -- From Ben Stein and Prof Jeremy Siegel (DIA, EFA, FEZ, IOO, TIP)

Includes: DIA, EFA, IOO, TIP
by: Roger Nusbaum

A neighbor of ours subscribes to a newsletter type of magazine called Bottom Line, writes Roger Nusbaum (wish list). She gives me a stack of them every so often because there is usually an investing article or two in each issue. Every so often there will be a very interesting article. I just went through a stack of them and found two model-ish portfolios, one from Jeremy Siegel and the other from Ben Stein.

Ben Stein's portfolio was a little more specific:

40%-60% of your retirement account allocated over three ETF, two of which should be foreign:

  1. Diamonds (NYSEARCA:DIA)
  2. iShares EAFE (NYSEARCA:EFA)
  3. streetTRACKS Dow Jones Euro Stoxx 50 (NYSEARCA:FEZ)

He says the rest should be in REITs/Mutual Funds:

  • Cohen & Steers Quality Income Realty Fund (NYSE:RQI)
  • Alpine Dynamic Dividend Fund (MUTF:ADVDX)
  • iShares TIPs Fund (NYSEARCA:TIP)
  • Templeton Emerging Markets Income Fund (NYSE:TEI)
  • Pimco Corporate Income Fund (NYSE:PCN)
  • Vanguard Total Bond Market Index Fund (MUTF:VBMFX)

Professor Siegel's portfolio idea is a little fuzzier:

  • 10% in "El Dorado" stocks which represent golden opportunities. He cited ABT, AZN, BP, KO, CL, DEO, NVS, PFE and RD.
  • 10% in "well-established" companies that have attractive P/E ratios, make everyday products and have good dividend yields. No names were mentioned.
  • 30% in ETFs of the three sectors likely to lead the stock market in the next decade which he feels will be energy, consumer staples and healthcare.
  • 30% in an index fund like Vanguard Total Stock Market Index fund (MUTF:VTSMX)
  • 20% in iShares S&P Global 100 (NYSEARCA:IOO) or streetTRACKS Global Titans Index Fund (NYSE:DGX)

Both portfolios have flaws and positives as would any model portfolio. Without looking under the hood, both are very heavy in mega cap and the foreign is very heavy to western Europe. Mega caps have lagged for a while and may continue to do so. Western Europe, I believe, has a tighter correlation to the US than it used to and I think will continue to get tighter which means less potential diversification.


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