More On All-ETF Portfolios

After my original article on all-ETF porfolios, writes Roger Nusbaum, Herb Morgan from Efficient Market Portfolios responded, and I then responded to his comment. This whole thing is a perfect example of what I mean when I write take a little from me and little from other people and create your own process. Herb and I do things differently, much differently. Is one better than the other?

You decide for yourself.

Herb has some performance numbers on his site that are a little difficult to read. The all ETF portfolios on Herb site were started some time in 2004. Most of the returns published are hypothetical. I don't know if his portfolios have a year in existance yet. Looking at the twenty year portfolio, Herb's YTD return, as of 6/30, for the conservative portfolio was +1.9%, for the moderate portfolio his one year return was +2.0% and the aggressive portfolio was up +1.3%. During that time the S+P 500 went from 1211 down up to 1191 which is a 1.65% loss. Herb does not disclose whether his numbers are net of fees. Clearly Herb is adding some value.

This image is a screen shot for a small account I manage for someone in his mid 30's. I think it is a close apples to apples comparison to Herb's 20 year portfolio. According to Joe at Schwab this account was worth $78,941 at year end. If you can't see the amount now (as of 8/22) it is $83,629. The gain for this account this year is 5.9%. The client pays fees outside the account, since I am not the point of contact I do not know how much the client pays. I charge my clients 1% annually so net of fees year to date would be 5.4%.

Again the SPX started the year at 1211 and closed on 8/22 at 1221, a gain of 0.8%. Maybe I am adding some value too. I have a couple of common stocks sprinkled in but this account does not capture much of a dividend the way larger accounts do. For larger accounts I own more individual stocks and so in certain sectors I can capture a much higher yield. The yield issue is the biggest flaw, in my opinion, to an all ETF portfolio.

To repeat; take a little from me, take a little from other people and come up with your own process.

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Comments

[Roger Nusbaum]

As I said, clearly Herb is adding value. I would still urge anyone reading this to try to learn from as many people as possible to formulate their process.

[hmorgan]

Roger,
While past performance is no guarantee of future results and investors may lose money, and our accounts ar not guaranteed or FDIC insured......here is what I have for actual net of fees and expenses performance for this year:

6-10 Year Portfolio Composite +2.78% through 7/31/2005
11-19 Year Portfolio composite +7.07% through 7/31/2005
20 + Year Portfolio Composite +7.19% through 7/31/2005

Thanks for asking.

Warmest Regards,

Herb Morgan
efficient-portfolios.c...