Seven ETF Model Portfolios

April 12, 2019 Printer Friendly Printer Friendly

For those of you that are ETF fans, we have added seven model ETF portfolios to the library. All of the ETFs used in the portfolio have low fees, are actively traded and have strong Morningstar rankings. The ETF model portfolios are as follows;

The Seven

ETF Simple Core Portfolio

This portfolio is simplest possible ETF model portfolio designed to give you broad exposure to the overall market with a higher weighing towards S&P 500 stocks. It does this via a 50% allocation to the S&P 500 using Vanguard’s VOO ETF and a 50% to the overall market via Vanguard’s VTI ETF. This portfolio has a super low expense ratio of 4 basis points.

ETF All Cap All Style Portfolio

This portfolio is designed to give you exposure to both the growth and value side of the market in equal measure. It also provide all cap exposure via selecting growth and value ETFs from each of the market cap categories; small cap, mid-cap and large cap. The six ETFs are all from Vanguard and they are VBK, VOT and VUG for small, mid, and large cap growth respectively. On the value side, there is VBR, VOE and VTV for small, mid and large cap. All are equal weighted in the portfolio. All six ETFs have a Morningstar rating of 4 or 5 stars. The overall expense ratio of the portfolio is 6 basis points.

ETF Growth Portfolio

This portfolio is the growth subset of the All Cap portfolio described above. It gives you exposure to the growth side of the house and provides all cap exposure via selecting the growth ETFs for small cap, mid-cap and large cap in equal proportion. All three ETFs selected have a Morningstar rating of 4 stars. The overall expense ratio of the portfolio is 6 basis points.

ETF Value Portfolio

This portfolio is the value subset of the All Cap portfolio described previously. It gives you exposure to the value side of the house and provides all cap exposure via selecting the value ETFs for small cap, mid-cap and large cap in equal proportion. The small cap and large cap ETFs have a Morningstar rating of 5 stars. Mid-cap is rated at 4 stars. The overall expense ratio of the portfolio is 6 basis points.

ETF Level 3 Portfolio

This is the ETF Level 3 Portfolio designed by James Cloonan the founder of AAII. It looks to avoid the problem of mega-cap stocks dominating the weightings of index based returns by selecting ETFs that use equal cap weightings for all the index stocks. The tickers for the two ETFs that do this are EQAL, which is the Invesco Russell 1000 tracker for mid-caps and RSP, the Invesco S&P 500 tracker. RSP is at a 40% allocation, EQAL at a 20% allocation in the portfolio. The remaining 40% is divided equally among the following two ETFs.

The Level 3 portfolio adds in VNQ which is the Vanguard real estate ETF. VNQ is used because real estate performs well over time and is not well correlated with the rest of the market, thereby reducing the portfolio’s volatility. VNQ’s allocation is at 20%.

The portfolio also throws in a 20% allocation for VOE, which is Vanguard’s mid-cap value fund, because, well Jim likes it.

All ETFs in the Level 3 portfolio currently have a 4 star rating from Morningstar. This portfolio is a bit more expensive to run than the previous ones mentioned at 16 basis points.

ETF Diversified Dividend Portfolio

This portfolio consists of 10 different diversified dividend focused ETFs that cover a range of dividend approaches including dividend growth, yield, consistency of payments, low volatility, international exposure, small and mid-cap exposure and preferred dividend streams. Sort of the whole kitchen sink for ETF dividend investors. The ten ETF tickers are; DES, DRGW, DON, DVY, IDV, NOBL, PGX, SDOG, SPHD and VYM and they are each evenly weighted at a 10% allocation of the portfolio.

Six of the ETFs carry a 5 star rating from Morningstar. Only two are under 4 stars. They are SDOG, which run a the dogs of the S&P 500 strategy, carries a 3 star rating. The preferred dividend fund PGX carries only a 2 star rating, but is a pretty unique offering and does pay a dividend currently north of 5.5%.

This portfolio is a bit more expensive to run then the others at 36 basis points.

ETF International Portfolio

Another kitchen sink portfolio, this one designed to get you international exposure, is the ETF International Portfolio. This portfolio has exposure all over the world, including the US. There are seven international ETFs in this portfolio, all equally weighted. All of the ETFs are currently rated at 4 stars from Morningstar. The tickers for the seven ETFs are as follows; ACWI, IEMG, IEUR, MCHI, SCZ, SPDW and SPEM. The overall expense ratio of this portfolio is 24 basis points.

The Seven – Past Performance

So how do these portfolios perform. Well one picture is worth a thousand words, so check out this image of the returns of each of these portfolio over time. The returns are as of April 3rd 2019 and include dividends payments in the return.

model etf performance

We can see that the ETF Growth Portfolio has been the best performer for the 1 year, 2 year and 3 year periods, where as Simple Core was the best over the last 5 years.

However return is one thing and risk adjusted return is another. Using the Portfolio Analytics capabilities of Stock Rover to take into account how much risk was taken to achieve return, we can see much more detail regarding risk, volatility and risk adjusted return from the image below. The Growth portfolio was still the winner, but by less, as it has the highest volatility of the seven. So to coin a phrase for this portfolio, when things are good, they are very very good, but when they are bad, this portfolio will be awful.

model etf risk adjusted returns

Getting the Portfolios

To get any of these portfolios into your Stock Rover account, go to our Library, select Portfolios and enter ETF into the search box. Simply check the model portfolios you wish to add and click import in the lower right hand corner as shown in the image below.

stock rover library


Aaron K says:

Great article, with actionable information on the ETF selectons! Very happy subscriber – keep up the great work!

Allen M. Oliver says:

Hi Stock Rover
More terrific STUFF as you guys continually give us new tools to further prove the value of being a Stock Rover subscriber
I like the broad approach of the ETF portfolio’s but I would have appreciated one or two which were focused on US Bonds, i.e. LQD
With the future being questioned I for one am buying Bond ETF’s when some of my names trigger my Trailing Stop Loss
Allen M. Oliver

Ken says:

These portfolios will save me time! Thank you!

Yefim says:

Interesting information. However, Porfolio 100% of USMV – minum volatility provides proctically the same results with much less drawdown than all other porfolios. Level 3 porfolio contains EQAL, RSP, and VONE. Their correaltion is about 0.95-0.98. What are the advantages to use so closely correalted 3 ETFs? Addition of VNQ enhace diveticifaction. I backtesting just RSP (80%) or VONE (80%) and the results are clearly better. What am I missing? Dr. Reisman please comment.

Howard Reisman says:

I’m not a fan of putting all portfolio assets into a single ETF, but maybe that is just me. The Level 3 portfolio is one favored by AAII so I included it in this blog as it is a popular portfolio. It is not my personal favorite. They would really need to speak to its construction.

Yefim Revutsky says:

I completely agree with Dr. Reisman that portfolio with one USMV (or any other “brilliant” ETF)
without a bond ETFs is a prudent idea. I consider that all those allocations created by Faber, Svensen,
are just Strategic Asset Allocation (SAA) and (in my opinion) should be complemented by Tactical Asset Allocation (TAA). I back testing Fidelity Balnced Fund (50-70%) allocation, and as SAA it performs almost as good as a prominent Swensen Endowment. I also backtesting Capital Mangement Porfolios and they performs worse thatn FBALX. Again, what I am missing? Thanks you very much. Yefim

Yefim Revutsky says:

Dr. Resman please comment. Happy New Year. Warm Regards, Yefim

Howard Reisman says:

I have no knowledge of Capital Management or their portfolios so I can’t comment on why they perform worse than FBALX, but if they are comparable as far as their investment objective goes, I certainly would look at both their holdings and the management expense of their products vs. Fidelity.

Comments are closed.