Fund Watch


6 Great ETF Portfolios

Nellie S. Huang

Pick one of our exchange-traded fund portfolios to suit your goals, time horizon and tolerance for risk -- or mix and match.



We offer packages of exchange-traded funds to suit just about every kind of investor, from those who seek aggressive growth to those who want nothing to do with stocks. Pick a portfolio that suits your goals, time horizon and tolerance for risk -- or mix and match.

SEE ALSO: Kiplinger's Model Portfolios


BALANCED

For those seeking a 60/40 stock-and-bond mix.

Vanguard Total Stock Market (symbol VTI): 40%
Type of fund: Entire U.S. Market
Vanguard Total Bond Market (BND): 40%
Type of fund: High-quality bonds
Vanguard FTSE All-World ex-US ETF (VEU): 20%
Type of fund: Foreign stocks

This bundle holds only three ETFs, but it covers a lot of territory: With 60% in stocks and 40% in bonds, it offers exposure to almost every corner of the stock and bond markets -- and packs a 1.8% yield, too. Total Stock tracks an index that includes nearly every U.S. stock. FTSE All-World ex-US covers the rest of the world. Total Bond, which buys high-grade U.S. debt, doesn't own every IOU in the Barclays Aggregate Bond index, but it holds enough of them (nearly 5,000 issues) to track the index closely.

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CONTRARIAN

For those going against the herd.

PowerShares Financial Preferred (PGF): 15%
Type of fund: Preferred stocks
iShares FTSE NAREIT Residential Plus Capped Index (REX): 15%
Type of fund: Real estate investment trusts
iShares PHLX SOX Semiconductor Sector (SOXX): 10%
Type of fund: Technology stocks
iShares MSCI South Korea Index (EWY): 10%
Type of fund: Single country
iShares MSCI Germany Index (EWG): 10%
Type of fund: Single country
iShares MSCI Switzerland Index (EWL): 10%
Type of fund: Single country
Vanguard Information Technology (VGT): 10%
Type of fund: Technology stocks
iShares MSCI BRIC Index (BKF): 10%
Type of fund: Emerging-markets stocks
Cash: 10%

Most investors loathe bank stocks, which makes them ideal for contrarians. The PowerShares ETF, which holds preferred stocks, yields a spiffy 7.1% and has held up better than other financial-sector ETFs since 2008. The rest of the package contains a healthy dose of out-of-favor foreign markets, including the BRICs -- Brazil, Russia, India and China -- which performed poorly in 2011. Funds investing in technology stocks and real estate investment trusts round out the portfolio.


INCOME

For those seeking fat yields.

Market Vectors High-Yield Muni Income (HYD): 20%
Type of fund: Tax-free bonds
iShares S&P U.S. Preferred Stock Index (PFF): 20%
Type of fund: Preferred stocks
http://etfs.morningstar.com/quote?t=PFF iShares Dow Jones U.S. Real Estate (IYR): 15%
Type of fund: Real estate investment trusts
iShares iBoxx $ High Yield (HYG): 15%
Type of fund: Junk bonds
Vanguard Intermediate Term Bond (BIV): 10%
Type of fund: Intermediate-term bonds
Utilities Select Sector SPDR (XLU): 10%
Type of fund: Utility stocks
iShares iBoxx $ Investment Grade Corporate (LQD): 10%
Type of fund: High-quality corporate bonds

With yields in the gutter, what's an income investor to do? This package, 45% in stocks and 55% in bonds, offers a 5.3% yield, some of it (from the municipal-bond fund) tax-free. On the bond side, the portfolio leans toward a mix of medium-term government and corporate debt (BIV), a high-grade corporate fund (LQD) and a junk-bond fund (HYG). On the stock side, the package includes an ETF that buys real estate trusts and one that focuses on utility stocks. It also holds a preferred-stock ETF.


TOFURKY

For stock-like returns without stocks.

Market Vectors High Yield Muni Income (HYD): 20%
Type of fund: Tax-free bonds
iShares iBoxx Investment Grade Corporate Bond (LQD): 20%
Type of fund: High-quality bonds
iShares S&P U.S. Preferred Stocks Index (PFF): 15%
Type of fund: Preferred stocks
iShares Barclays MBS Bond (MBB): 15%
Type of fund: Mortgage securities
JPMorgan Alerian MLP Index ETN (AMJ): 10%
Type of fund: Energy partnerships
iShares Gold Trust (IAU): 10%
Type of fund: Gold bullion
WisdomTree Emerging Markets Local Debt (ELD): 5%
Type of fund: Foreign bonds
United States Commodity Index (USCI): 5%
Type of fund: Commodities

Think the market is stacked against you? This portfolio shuns common stocks in favor of other asset classes. It holds high-quality corporate bonds; government-backed mortgage securities (MBB); lower-quality municipals; preferred stocks; and emerging-markets bonds. It also provides exposure to stuff through a commodities fund, a gold ETF and an exchange-traded note that tracks an index of energy-oriented partnerships (see FUND WATCH: When ETNs Trump ETFs). Overall, the portfolio yields 4.2%.


MULTI-ASSET

For growth without going 100% into stocks.

United States Commodity Index (USCI): 20%
Type of fund: Commodities
iShares Dow Jones U.S. Real Estate (IYR): 20%
Type of fund: Real estate investment trusts
Vanguard Intermediate Term Bond (BIV): 10%
Type of fund: Intermediate-term bonds
iShares Diversified Alternatives Trust (ALT): 10%
Type of fund: Alternative strategies
Credit Suisse Merger Arbitrage Liquid Index ETN (CSMA): 10%
Type of fund: Merger stocks
Vanguard MSCI EAFE (VEA): 7%
Type of fund: Foreign stocks
iShares MSCI Emerging Markets (EEM): 7%
Type of fund: Emerging-markets stocks
Vanguard Total Stock Market (symbol VTI): 6%
Type of fund: Entire U.S. Market

Alternative asset classes are the hot new thing. This portfolio starts with 20% apiece in three standbys: regular stocks (VEA, EEM and VTI), real estate trusts and bonds. It devotes 20% to commodities. The final 20% is divided between an exchange-traded note that tracks the performance of companies involved in takeovers or mergers, and an unusual fund (ALT) that bets on and against a variety of asset classes, including stocks and bonds (both foreign and U.S.) and currencies.


AGGRESSIVE

For those who want an all-stock package.

iShares Russell 1000 Growth Index (IWF): 30%
Type of fund: Big-company growth stocks
iShares Russell 2000 Index (IWM): 20%
Type of fund: Small-company stocks
WisdomTree Emerging Markets SmallCap Div (DGS): 20%
Type of fund: Emerging-markets stocks
Vanguard MSCI EAFE (VEA): 15%
Type of fund: Foreign stocks
iShares Dow Jones U.S. Real Estate (IYR): 15%
Type of fund: Real estate investment trusts

This package is geared toward investors who can tolerate a high dose of risk. The entire portfolio is in stocks, including 15% in a real estate trust. The biggest chunk is in large-company growth stocks, but the portfolio also holds two small-company ETFs: One (IWM) focuses on domestic stocks, and the other (DGS) invests in more than 550 small, dividend-paying companies in emerging markets, including Taiwan, Thailand, South Korea and South Africa. It yields a generous 3.6%.



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