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Best ETFs
The ETFdb Realtime Ratings "Best Of" Pages showcase the highest
rated ETPs across each asset class. Investors can quickly and easily
sort through the entire exchange-traded universe to find the highest
rated ETP which best suits their needs. The "Best Of" pages display the
"A+" rated ETPs in each individual ETFdb Category based on our
prorpritary ratings methodology. Learn more about ETFdb Realtime
Ratings.
Each "Best Of" page feature the ETPs which hold the "A+" score in each
individual metric, including: Liqiduity, Expenses, Performance, Volatility,
Dividend, and Conentration; the "Best Of" pages also highlight the
overall "A+" rated ETP from each category.
Performanc Realtime
ETFdb Category Liquidity Expenses Volatility Dividend Concentration
e Overall
All Cap Equities USMV SCHB USMV TUTT ITOT VTI ITOT
Alternative Energy Equities PBW ICLN QCLN PZD TAN PBD FAN
Asia Pacific Equities EWT VPL FKO DVYA FKO VPL VPL
Building & Construction XHB XHB XHB FLM XHB FLM XHB
Commodity Producers
GDX XME SILJ MOO GOEX HAP GUNR
Equities
Consumer Discretionary
XLY FDIS CARZ IYC BJK VCR VCR
Equities
Consumer Staples Equities XLP FSTA FXG VDC VDC IYK VDC
Foreign Large Cap Equities EFA SCHF PIZ EFAV IDV TLTD IEFA
Global Real Estate IFGL REET VNQI RWO DRW VNQI VNQI
Health & Biotech Equities XLV VHT BBH PPH XHS VHT VHT
High Yield Bonds JNK HYLB HYXU SRLN HYLD GHYG JNK
International Government
BWX IAGG GGOV BWZ BWX BWX IGOV
Bonds
Large Cap Blend Equities SPY SCHX SPXV PBP QYLD PBP SCHX
Large Cap Growth Equities QQQ SCHG IWY WBIE IWY IUSG IWF
Large Cap Value Equities DIA SCHV SYV WBIL DIV EXT VYM
Latin America Equities EWZ EWW EWW AND DBBR GML ILF
Leveraged Real Estate DRN MORL DRN REK n/a n/a URE
Mid Cap Blend Equities MDY SCHM RWK CZA CZA VXF IWR
Mid Cap Growth Equities IWP VOT IVOG JKH FNY IWP IWP
Mid Cap Value Equities IWS VOE PXMV IVOV DON EZM VOE
Mortgage Backed Securities MBB VMBS CMBS MBG MBG VMBS VMBS
New York Munis PZT NYF NYF NYF PZT NYF NYF
Oil & Gas USO USO UGA DBE n/a n/a DBE
Preferred Stock/Convertible
PFF CWB CWB PGF SPFF PFF PFF
Bonds
Small Cap Blend Equities IWM SCHA SMLL SMD PZI VTWO SCHA
Small Cap Growth Equities IWO VBK IJT PXSG PXSG VTWG VBK
Small Cap Value Equities IWN VBR RZV VIOV DES VTWV VBR
Target Retirement Date n/a n/a n/a n/a n/a n/a n/a
Total Bond Market AGG SCHZ BIV FTSM PCEF BND BND
Transportation Equities IYT XTN XTN SEA SEA XTN SEA
Volatility Hedged Equity PHDG FDLO VQT VQT VIXH PHDG PHDG
Portfolio Strategy
investors in mind given its very heavy allocation to equities and lack
of “safe haven” U.S. bond market exposure which is a core
component in most other portfolios.
Time Horizon: Long. Investors with a long term view will benefit most
from this portfolio since the risk/return profile for many of the equity
holdings in this portfolio can be very rewarding to those who can
stomach the risk over many years, and increase their potential to
achieve diversification benefits as well as enhanced returns.
Portfolio Snapshot
Following the most recent financial crisis it’s not much of a surprise that
emerging market equities, as represented by VWO, declined the most,
while domestic large caps managed to hold their ground better. It’s also
worth noting that emerging market bonds, as tracked by EMB, proved to
be quite the nontraditional “safe haven” during the economic downturn,
as well as stable sources of return in the years of recovery following.
The varying degrees of gains and losses during both the recession and
recovery reveals the importance of staying diversified across market cap
levels as well as economic regions regardless of the fact that this
portfolio follows an aggressive investment strategy.
Portfolio Expenses
Holdings Overview
Below is a brief overview of each component of this ETFdb Portfolio.
SPY: This is one of the biggest ETFs on the market, and tracks the
widely-followed S&P 500 Index.
IJH: This ETF tracks the performance of the mid capitalization sector
of the U.S. equity market.
VB: This fund tracks the MSCI US Small Cap 1750 Index, which
represents the universe of small-capitalization companies in the U.S.
equity market.
VWO: This ETF gives broad based exposure to the performance of
emerging market stocks.
ADRD: The underlying index of this ETF is capitalization-weighted
and designed to track the performance of approximately 100
developed market-based depositary receipts.
FRN: This ETF tracks the performance of depositary receipts, in ADR
or GDR form, that trade on the London Stock Exchange, New York
Stock Exchange, NYSE Amex and Nasdaq Stock Market of
companies from countries that are defined as the frontier market.
EMB: This ETF tracks a diverse U.S. dollar denominated index
consisting of emerging market debt instruments.
ELD: This fund gives investors access to local debt denominated in
the currencies of emerging market countries.
This ETFdb Portfolio spreads its exposure across the risk continuum,
including significant weightings to domestic and international equities as
well as emerging market bonds. The result is a portfolio with fairly high
risk exposure and well-diversified holdings.
Large cap equities tend to be more stable than mid cap stocks, but may
also offer less growth potential. Although correlation between equities of
different sizes is strong, the inclusion of mid cap, small cap, and micro
cap equities in this portfolio certainly offers excellent diversification
benefits, and also offers exposure to companies that have the potential
to experience significant growth.
The equity portion of this ETFdb Portfolio is equally split between U.S.
and international exposure. Historically, U.S. equities have tended to be
more stable than equities listed in developing economies. However, we
feel that including foreign equities coincides well with this portfolios
“aggressive” theme. Allocating half of our equity holdings to international
stocks certainly increases our risk, however, it simultaneously offers the
potential to achieve uncorrelated returns and ideally improve the
portfolios overall risk/return profile.
This fund offers exposure to the 500 largest companies in the U.S.
equity market, making it a reliable barometer of broad domestic stock
market performance. Unlike many other large cap funds, this ETF does a
nice job of avoiding a top-heavy portfolio, allocating about one-fifth of
total assets in its top 10 holdings. From a sector perspective, SPY is
incredibly balanced across nearly every industry in the U.S. economy;
top five allocations in descending order include technology, financial
services, energy, industrials, and health care. Given its title it shouldn’t
be much of a surprise that SPY is titled towards giant and large cap
corporations, which we believe is a necessary exposure making this fund
a core holding.
Cost conscious investors who wish to minimize expenses over the long
run should consider VOO as a cheaper alternative which tracks the
same index as SPY.
Mid cap equities tend to bear a slightly different risk/return profile than
their large cap counterparts, although the two assets classes are
certainly heavily correlated. For example, in 2010 IJH returned a stellar
25%, while SPY lagged behind and gained just over 12% in that same
time period.
VB [Fact Sheet]
VB provides access to the small cap corner of the U.S. equity market
and it does so through a deep portfolio of over 1,700 holdings. While this
fund may be riskier than SPY for example, it does an excellent job of
minimizing company-specific risk by allocating less than 3% in the top 10
holdings.Top three allocations by sector include technology, industrials,
and consumer cyclical.
We like VWO over the iShares MSCI Emerging Markets Index Fund
(EEM) since it offers virtually the same exposure for a much cheaper
expense fee.
ADRD [Fact Sheet]
ADRD tracks the performance of 100 multinational companies based in
a range of developed markets. Top allocations by country include United
Kingdom, Japan, and Switzerland. The inevitable tilt towards giant cap
size companies brings upon the tendency to overweight financial
services and energy companies, a common inefficiency of many popular
emerging market funds. Likewise, the portfolios is a bit top-heavy,
allocating over one-third of its assets in ten companies.
This fund is by no means towards the high-end of the cost spectrum,
however, investors should still take a closer look at SCHF which offers
cheaper broad-based international equity exposure.
ELD is a fairly new fund in the ETF space and it lacks sufficient returns
data to be included in the correlation chart above, however, investors
can anticipate that it bears very close resemblance to EMB.
Disclaimer
From time to time, the authors of this report or other employees of ETF
Database may have a long or short position in securities referred to
herein. The factual statements herein have been taken from sources we
believe to be reliable, but such statements are made without any
representation as to the accuracy or completeness or otherwise.
Moderate ETFdb Portfolio
Published on by MI CHAEL JO HNST O N on JANUARY 18, 2010 | Updated NOVEMBER 20, 2014
Portfolio Strategy
investors with an average risk tolerance, meaning they want more out
of their portfolio than low, stable returns, but also want to avoid
excessive risk and volatility. A large number ofinvestors will find this
level of risk appropriate for their retirement portfolios, especially those
with a number of years remaining before their anticipated retirement
date.
Portfolio Snapshot
Below are the holdings and allocations for the Moderate ETFdb Portfolio.
For each ETF included in this portfolio, we have also provided alternative
funds that offer similar exposure.
Ticke Asset Allocatio Expens Alternativ
ETF
r Type n e Ratio e ETFs
iShares
Russell Domestic
IWB 25.0% 0.15% SPY, IVV
1000 Index Equities
Fund
iShares
Russell Domestic
IWM 10.0% 0.28% MDY, IJR
2000 Index Equities
Fund
Schwab
Internation Internation ADRD, EF
SCHF 10.0% 0.09%
al Equity al Equities A
ETF
Vanguard
Emerging Internation
VWO 10.0% 0.20% EEG, EEM
Markets al Equities
ETF
Tota
l
Fixe
B Bon 0.1 AG
d 20.
N d 0 G, L
Inco 0%
D Mar % AG
me
ket
ETF
Inve
sTo
p
Cor
pora Fixe
L 0.1
te d 10.
Q 5 BIV
Bon Inco 0%
D %
d me
Inde
x
Fun
d
iSha
res
Barc
lays Fixe
0.2
TI TIP d 10. TIP
0
P S Inco 0% Z
%
Bon me
d
Fun
d
Van
guar
V Real 0.1 RW
d 5.0
N Esta 0 R, I
REI %
Q te % YR
T
ETF
0.1
Weighted Average
5
Expense Ratio
% Ticker 2009 2010 2011 2012 2013
IWB 28.1% 16.0% 1.2% 16.5% 32.3%
Historical Return IWM 28.5% 26.9% -4.4% 16.7% 38.7%
Analysis SCHF n/a 9.3% -12.7% 18.8% 18.9%
VWO 75.3% 19.5% -18.7% 19.2% -4.9%
The adjacent table BND 3.4% 6.2% 7.9% 3.9% -2.1%
provides historical LQD 8.6% 9.3% 9.8% 10.6% n/a
results for each TIP 8.0% 6.1% 13.3% 6.4% -8.5%
component of this ETFdb VNQ 30.1% 28.4% 8.6% 17.6% 2.3%
13.8
Portfolio n/a 1.0% 13.0% 12.0%
%
Compare to SPY 26.3% 15.0% 1.2% 16.0% 32.3%
Compare to AGG 3.3% 6.4% 7.7% 3.8% -2.0%
Portfolio, as well as backtested results (as available) for the entire
portfolio from 2008 to 2012. The table also shows how this ETFdb
Portfolio performed relative to a popular stock market benchmark (SPY)
and bond benchmark (AGG).
Notice that VWO was by far the worst performer during the market slump
in 2008, however, this ETF turned in a stellar performance the following
year, further extending gains into 2010.
Portfolio Expenses
Holdings Overview
Below is a brief overview of each component of this ETFdb Portfolio.
IWB: This ETF offers exposure to the Russell 1000, one of the most
widely-followed and broad-based benchmarks for U.S. equities. The
Russell 1000 is weighted towards large cap equities, but contains
some mid-size firms as well.
IWM: This ETF tracks the Russell 2000 Index and includes a well-
diversified basket of small-cap and mid-cap stocks.
VWO: This ETF holds stocks listed in more than a dozen emerging
markets around the world, offering exposure to a part of the global
economy that is expected to increase in importance in coming
decades.
BND: This ETF offers exposure to investment grade sector of the
U.S. corporate bond market, including corporate bonds, Treasuries,
and debt issued by agencies of the U.S. government.
LQD: This ETF offers investors exposure to high-quality corporate
bonds while avoiding investments in speculative “junk” bonds.
TIP: This ETF invests in inflation-protected securities, meaning that
real returns are generally guaranteed regardless of the level of price
increases that may eat into nominal returns.
VNQ: This ETF offers exposure to U.S. real estate markets. While
this asset investment class is risky (as evidenced by the recent
declines in value), we believe can provide enhanced returns and
diversification benefits, and deserves a minor allocation in this
portfolio.
This ETFdb Portfolio spreads its exposure across the risk continuum,
including significant weightings to everything from inflation-protected
Treasuries to emerging market equities and domestic real estate. The
result is a portfolio with moderate risk exposure and well-diversified
holdings.
Equity Overview
This ETFdb Portfolio contains an allocation of 55% to equities, including
both domestic and international stocks. A significant portion of this
ETFdb Portfolio’s equity holdings are in large and giant cap stocks,
which generally have a market capitalization of more than $10 billion.
Large cap equities tend to be more stable than mid cap stocks, but may
also offer less growth potential. Although correlation between equities of
different sizes is strong, the inclusion of mid cap, small cap, and micro
cap equities in this portfolio does offer some diversification benefits, and
also offers exposure to companies more likely to experience significant
growth. Through IWB and IWM, this portfolio maintains exposure to the
largest 3,000 U.S.-listed equities.
The equity portion of this ETFdb Portfolio is tilted towards stocks listed
and operating primarily within the U.S., but does include material
allocations to international stocks in both emerging and developed
markets. Historically, U.S. equities have tended to be more stable that
equities listed in developing economies, although this has not
necessarily been the case in recent this years. For investors looking to
avoid exposure to U.S. equities, our Ex-U.S. ETFdb Portfolio outlines an
effective strategy.
We chose VWO over the iShares MSCI Emerging Markets Index Fund
(EEM) for two reasons: 1) competitive expense ratio (0.20% vs. 0.67%)
and 2) the full replication strategy of VWO (EEM uses a sampling
strategy).
Overall, this ETFdb Portfolio’s fixed income holdings are heavy in high
quality bonds with a short to intermediate duration, thereby minimizing
credit risk and exposure to rising interest rates. This portfolio does
maintain a moderate allocation to corporate bonds through BND, but this
is limited to investment grade debt issues.
While many investors now avoid exposure to real estate (besides direct
exposure through their residence), we believe this asset class can still
offer valuable diversification benefits, as well as opportunities for
enhanced returns in certain environments. We understand that
investments in the U.S. real estate market are risky plays, but believe
that when included with equity and fixed income investments this asset
class can reduce overall portfolio volatility.
Ticke
ETF Expense
r
RWX SPDR DJ Wilshire International Real Estate 0.59%
WPS iShares S&P World ex-U.S. 0.48%
DRW WisdomTree International Real Estate Fund 0.58%
Diversification is a key
component of any client portfolio. The chart above shows the correlation
between each component of theModerate ETFdb Portfolio over the last
two years.
As is expected, there is a fairly strong correlation between the equity
components in this ETFdb Portfolio, including between domestic and
foreign equities. The fixed income elements of this ETFdb Portfolio add
meaningful diversification benefits to the portfolio, as these ETFs
maintain low correlations with equities and only moderate correlations
with each other. Since the adjacent chart reflects a relatively recent time
period, correlations between real estate and equity ETFs are high, and
may lessen over time.
Portfolio Strategy
The 30 Years Til Retirement ETFdb Portfolio is designed for clients who
expect to retire in approximately 30 years, and expect to live for
approximately 30 years following their retirement. This ETFdb Portfolio is
inspired by numerous widely-accepted investment strategies that
advocate an allocation of roughly 90% equity and 10% fixed income for
investors with these circumstances. Although many investors have shied
away from real estate investments in recent years, we believe this asset
class can still provide valuable return enhancement and diversification
benefits (particularly over the long term), and as such have given it a
10% allocation (reducing our total equity allocation to approximately
80%).
We have tilted the significant equity allocation towards large cap U.S.
stocks through IWB, but the majority of equity exposure in this ETFdb
Portfolio comes through small- and mid-cap U.S. equities and
international stocks.
This portfolio may be excessively risky for retired investors, but may
have an unnecessarily large allocation to fixed income investments for
investors facing a long time horizon and/or a relatively high ability to take
on risk.
Portfolio Snapshot
Expens Alternative
Ticker ETF Asset Type Allocation
e Ratio ETFs
iShares Russell Domestic
IWB 35% 0.09% SPY, IVV
1000 Index Fund Equities
Vanguard Mid-Cap Domestic
VO 15% 0.10% IWR, IJH
ETF Equities
iShares S&P
Domestic
IJR SmallCap 600 10% 0.16% IWM, RWJ
Equities
Index Fund
Vanguard
International
VWO Emerging Markets 15% 0.20% EEM,ADRE
Equities
ETF
PowerShares
International
ADRD BLDRS Developed 5% 0.30% PFA, IFSM
Equities
Markets 100 ADR
iShares Barclays
Fixed
AGG Aggregate Bond 2.5% 0.08% BND
Income
Fund
iShares Barclays Fixed
TIP 2.5% 0.20% TIPZ
TIPS Bond Fund Income
iBoxx $ InvesTop
Fixed
LQD TM Corporate 2.5% 0.15% n/a
Income
Bond Fund
iBoxx $ high Yield
Fixed
HYG Corporate Bond 2.5% 0.50% HYG
Income
Fund
Vanguard REIT
VNQ Real Estate 5% 0.15% IYR, ICF
ETF
iShares S&P World
WPS ex-U.S. Property Real Estate 5% 0.48% RWX,DRW
Fund
Weighted Average
0.16%
Expense Ratio
Portfolio Expenses
Holdings Overview
Below is a brief overview of each component of this ETFdb Portfolio.
IWB: This ETF offers exposure to the Russell 1000, one of the most
widely-followed benchmarks for U.S. equities, and is weighted
towards large cap equities (although it also includes mid cap and
small cap firms).
VO: This ETF tracks a well-diversified basket of mid-cap stocks,
which generally have a market cap between $2 billion and $10 billion.
IJR: This fund offers exposure to equities of smaller companies,
which generally offer greater return characteristics but can be
significantly more volatile than larger equities.
VWO: This ETF offers diversified exposure to emerging markets,
which generally can offer significantly more risk and reward than
domestic equities.
ADRD: Whereas VWO offers exposure to emerging markets, this
ETF offers exposure to developed markets outside the U.S. Major
concentrations include the U.K., Japan, Spain, and France.
AGG: This ETF offers diversified exposure to the U.S. investment
grade bond market, including corporate debt, U.S. Treasuries, and
debt issued by U.S. agencies.
TIP: This ETF invests in inflation-protected securities, meaning that
real returns are guaranteed regardless of the level of price increases
that may eat into nominal returns.
LQD: This ETF holds investment grade debt issued by U.S.
corporations. Investment grade debt generally has a low risk of
default.
HYG: HYG invests in corporate debt securities that are rated below
investment grade (also known as “junk” bonds). These securities
have a higher likelihood of default, but also generally offer higher
yields than investment grade debt.
VNQ: This ETF offers exposure to U.S. real estate markets. While
this asset investment class is risky, it deserves some allocation in this
portfolio.
WPS: This ETF offers exposure to real estate markets outside of the
U.S. As evidenced by the recent economic recession, global real
estate investments may perform significantly better than those in the
U.S. in certain economic environments.
Equity Overview
This ETFdb Portfolio contains an allocation of roughly 80% to equities,
including domestic and international stocks. Just over one-half of this
ETFdb Portfolio’s equity holdings are giant and large cap stocks (which
generally have a market cap of more than $10 billion), while the
remaining equities is in mid cap, small cap, and micro cap funds.
Large cap equities tend to be more stable than mid cap stocks, but also
typically offer less growth potential. Although correlation between
equities of different sizes is strong, the inclusion of small and micro cap
equities in this portfolio does offer some diversification benefits, and also
offers exposure to companies more likely to experience significant
growth.
The equity portion of this ETFdb Portfolio is dominated by stocks listed
and operating primarily within the United States, but also includes a
moderate weighting to international equities. These equities tend to be
more risky than domestic stocks, making them appropriate for investors
with a moderately high risk tolerance and a long time horizon.
IWB [Fact Sheet]
IWB offers exposure to the Russell 1000 Index, a benchmark investing in
large, liquid U.S. securities. We have given a significant allocation to
IWB because this ETF generally serves as a reliable barometer of U.S.
equity markets. And while the companies held by IWB are listed on U.S.
equity markets, they are generally global firms that generate a significant
portion of revenues from overseas operations. This provides some
degree of international diversification within the domestic equities portion
of this ETFdb Portfolio. With an expense ratio of only 15 basis points,
IWB offers cheap, well-diversified equity exposure.
VO [Fact Sheet]
While the majority of domestic equity exposure in this ETFdb Portfolio is
achieved through large cap equities, including small and mid cap funds
can provide valuable return enhancement and diversification benefits.
VO invests exclusively in U.S.-listed mid cap companies (generally those
with a market capitalization between $2 billion and $10 billion). While
some investors prefer a “barbell” strategy that complements large cap
stocks with small caps, we believe mid caps can offer a unique return
profile, and are therefore worthy of inclusion in most portfolios.
IJR [Fact Sheet]
IJR invests in the smallest publicly-traded U.S. equities, focusing on
companies with a market capitalization of less than $2 billion. Small cap
equities have historically provided larger returns than bigger companies,
but also come with more volatility. We selected IJR because it provides
deep exposure to the small cap equity market by maintaining
approximately 600 individual holdings.
Overall, this ETFdb Portfolio’s fixed income holdings are heavy in high
quality bonds with a short to intermediate duration, but do maintain a
moderate amount of exposure to fixed income investments with higher
yields (and higher risk).
Real Estate Overview
While many investors now avoid exposure to real estate (besides direct
exposure through their residence), we believe this asset class can still
offer valuable diversification benefits, as well as opportunities for
enhanced returns in certain environments. However, we believe that real
estate exposure should go beyond the U.S.