How CNN Money's '5 Stocks for the World' Fare Against a Diversified Portfolio of Dividend ETFs

by: MyPlanIQ

John Birger and Scott Cendrowski from CNN Money point out that the best products have a worldwide customer base. They then go on to recommend companies that have a strong international bias -- including companies based outside the US.

Modern portfolio theory has long advocated diversification with non correlated assets and this is a step in the right direction for stock portfolios which can be somewhat myopic.

The authors mentioned above then go on to recommend five stocks that they believe have this international flavor. This is an interesting angle for those looking to build diversified long term retirement portfolios.

Their recommended stocks are:

We entered these funds into our system and then compared them to a balanced portfolio of Dividend producing ETFs.


ETF in Portfolio

REAL ESTATE ICF (iShares Cohen & Steers Realty Majors)
FIXED INCOME TIP (iShares Barclays TIPS Bond)
Emerging Market VWO (Vanguard Emerging Markets Stock ETF)
US EQUITY DVY (iShares Dow Jones Select Dividend Index)
US EQUITY VIG (Vanguard Dividend Appreciation ETF)
INTERNATIONAL EQUITY IDV (iShares Dow Jones Intl Select Div Idx)
High Yield Bond HYG (iShares iBoxx $ High Yield Corporate Bd)
INTERNATIONAL BONDS EMB (iShares JPMorgan USD Emerg Markets Bond)

Portfolio Performance Comparison

Portfolio/Fund Name

1Yr AR

1Yr Sharpe

3Yr AR

3Yr Sharpe

5Yr AR

5Yr Sharpe

5 stocks for the world's new spenders 37% 191%
Retirement Income ETFs Strategic Asset Allocation Moderate 15% 162% 4% 17% 6% 25%
Retirement Income ETFs Tactical Asset Allocation Moderate 10% 127% 10% 79% 12% 80%

Three Month Chart

One Year ChartThis is an interesting mix of stocks. There isn't enough history to make any long term conclusions -- the historical returns are limited by the newest stock, LVMUY, which started trading at the beginning of 2010. Also, there has been some worrying volatility, especially in April of this year, despite the strong one year performance.

As we noted above, this portfolio doesn't have enough history so it will be interesting to track this and see how it performs going forward.

Disclosure: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.

Disclosure: Author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.