All ETF portfolios (AGG, EEM, EFA, EPP, IJR, MDY, SHY, SPY)

by: Roger Nusbaum

I receive a publication called ETF Report (ETFR) from a web site called Index Universe. The site is excellent and the mailer I get is also excellent, writes Roger Nusbaum.

In the latest report were two stories about all ETF portfolios. One was a suggested allocation from S&P.
37% SPY
4%  MDY
4%  IJR
9%  EFA
4%  EPP
2%  EEM
15% AGG
10% SHY
15% cash

This is obviously a fairly conservative portfolio but the fixed income ETFs have low yields (AGG yields 3.49% and SHY yields 2.23%). The yields aren't terribly low but sort of low.

The other ETF portfolio article was about an offering from Ryan Beck & Co., the place where Joe Battipaglia hangs his hat, and Joe is involved in the construction of the three portfolios they offer to clients. The three choices are called growth, balanced and conservative. There is less detail about composition but growth is 75% equity (67% domestic 8% foreign) ETFs, 20% fixed income and REIT ETFs and 5% cash. The balanced is 60% equity (55% domestic 5% foreign), 35% fixed income/REIT and 5% cash. The conservative is 40% equities (36% domestic 4% foreign, 55% fixed income/REITs and 5% cash. According to the article Ryan Beck has $5 million in the program. Maybe they are having trouble attracting assets because Joe is making the investment decisions (humor attempt).

There are other firms that have ETF portfolios similar to these and more firms will have them in the near future. STAY AWAY! Knowing full service firms they way I do; any offering will be very expensive. One of the benefits of ETFs is they are a cheap way to capture the effect of various parts of the market. It doesn't make much sense to me to give that benefit away. Also given how closely all the, for example, big caps ETFs track each other do you really need to pay someone 2% to tell you which one you should own?

ETFs are innovative tools. The ETF portfolio products I have seen do not offer an innovative way to use ETFs. Chances are you can come up with just as good of an ETF portfolio on your own with out overpaying your broker for it.

The other point I would make is an all ETF portfolio isn't necessarily the best way to invest. ETFs are one tool among others. Doesn't it make sense to use of all tools available to you? Some common stock, an ETF here and there, a CEF for an area of the market that is hard to capture otherwise, maybe a bond? Am I alone on this?