Friday, August 23, 2013

My Adjusted ETF Portfolio Mix

In a recent blog called Easy Investment Portfolio Management Using ETFs, I talk about how the advent of ETFs has enabled small investors to participate in domestic and international stocks and bonds at very low costs.

I included my current IRA ETF portfolio mix and made a projection for converting my taxable account.  If you remember, I said that I'm waiting for a market correction, hopefully this fall, before converting the portfolio to an ETF portfolio.  Something's changed.   In a blog called Jeremy Grantham's Expected Asset Returns--Next 7 Years, Jeremy Grantham, a very respected investor, confirms what I suspected; that US stocks are pricey with potential negative 7 year returns.  The other takeaway is that international stocks and bonds look cheaper.

Therefore I've adjusted my projected taxable account ETF portfolio to reflect more international exposure. (I've added int'l stocks but haven't researched emerging market bonds--I'll post another blog with the result of that research).  Remember, I'm waiting for a hefty correction this fall to convert from my cautious mutual fund portfolio in my taxable account.   Here goes:

SPY     Large Cap 2% yield                                                                      12.5%
VIG     Vanguard Large Cap US Dividend Appreciation 2% yield          12.5%
VXF     US Market-Total market excluding S&P500                               15%
VB        US Small Caps                                                                              5%
EEM    Emerg Mkts 2% yield                                                                    5%
VUE     World Markets excluding US stocks                                             5%
AGG    Aggregate Tot Bond 2.85%                                                            0% for now
IEI        3 to 7 year Treasury bond 0.6%                                                     0% for now
BIV      Vanguard Interm Muni 3.2% plus cap gain distributions               0% for now
MUB    Long Munis 3%                                                                              0% for now

Cash                                                                                                          45%

The breakdown is as follows:

Stocks   55%
Bonds   35%
Cash     10%

For stocks, there's 10% emerging markets and a total of 20% international stocks.  Go to Fidelity or your preferred site to research each of these ETFs before investing.  Also, Market Watch has some good articles on Lazy ETF Portfolios that are good "food for thought."  I'll update this information if I make changes.

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