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Don’t Get Too Cute With Your ETF Portfolio

[1]I continue to work on building some interesting and efficient ETF sample portfolios [2] and always find it interesting to see things change a bit over time. Sometimes it’s about a new type of ETF being created (such as the WisdomTree emerging market bond ETF) and in other times it’s mostly about switching from one ETF to a similar one that has less tracking error, less fees, etc.

Today, I was reading about a new retirement portfolio that was created by CNBC [3] for 30 year-olds. One of the portfolios they built is for 30 year-olds and you can see what’s included:


SPDR S&P 500 (NYSEArca: SPY) 17.5%
Schwab U.S. Dividend Equity (NYSEArca: SCHD) 7.5%
Vanguard Mid Cap (NYSEArca: VO) 5%
First Trust Health Care AlphaDEX (NYSEArca: FXH) 5%
Vanguard FTSE All-World ex-US (NYSEArca: VEU) 17.5%
WisdomTree Emerging Markets Equity Income (NYSEArca: DEM) 5%
EGShares Emerging Markets Consumer Titans (NYSEArca: ECON) 7.5%
PowerShares S&P International Low Volatility (NYSEArca: IDLV) 5%
According to the CNBC ETF Advisory Council guidelines, the portfolio can hold 2 “core,” broad-based ETFs – in this case, one domestic and one international.


iShares Core Total U.S. Bond Market (NYSEArca: AGG) 2.5%
WisdomTree Emerging Markets Local Debt (NYSEArca: ELD) 2.5%


PowerShares Senior Loan Portfolio (NYSEArca: BKLN) 5%
Market Vectors Gold Miners (NYSEArca: GDX) 5%
Vanguard Global ex-US Real Estate (NYSEArca: VNQI) 5%
Peritus High Yield (NYSEArca: HYLD) 5%
PowerShares DB US Dollar Index Bullish (NYSEArca: UUP) 5%

So basically, this portfolio holds 15 different ETF’s with weights between 2.5% and 17.5%. I honestly don’t like it very much. Why? It’s trying to be “too cute”.  A retirement portfolio that is invested in ETF’s should be fairly simple in most cases. You generally want domestic and foreign equities (3-4 ETF’s) and fixed income (1-3 ETF’s). Yes, it’s possible to want exposure to other asset classes such as real estate or commodities… but 15 ETF’s? How could adding a US Dollar index be justified? It’s nice to mention it in a conversation but I don’t see the point honestly.  If a 30 year-old has 50K to invest, is he expected to put $1250 into a US dollar ETF? Really?

ETF Retirement Portfolio Is Supposed To Be Boring

I personally have my ETF portfolio but also have other more speculative/stock picking investments. So I’m more than happy with a boring, 6-7 ETF portfolio that will do well over time. If you’re looking to make specific picks, set yourself some other type of portfolio that can be more actively traded. Don’t take a 30 year bet based on some gut feeling… that defeats the purpose of such a portfolio [4].