As previously mentioned in my introduction post on ETF Asset Allocation, I discussed 2 ETF investing approaches; the micro and macro asset allocations. Today, I want to dig further into the macro investing strategy as I think you can setup a great ETF portfolio with a lazy management asset allocation technique. This won’t require much of your time while you will be able to:
#1 Follow the market
#2 Make money over time
#3 Optimize your fee structure
#4 Build a solid asset allocation
#5 Use few investment tools (only a few ETFs)
ETFs To Be Included In Your Asset Allocation:
While I won’t tell you which ETF to buy or to trade (I’m not making any recommendations on ETFs nor on your asset allocation), I made a list of ETFs covering specific markets along with a some information to help you make your own decisions. Remember that all ETFs are traded on the US market.
ETF US Market
| Ticker | Name | Market Cap | Price | Fees | 1Y Return | Dividend Yield |
|---|---|---|---|---|---|---|
| SPY | SPDR S&P 500 ETF Trust | $95,075,250,000.00 | 127.39 | 0.0945 | 14.231 | 1.779221339 |
| IVV | iShares S&P 500 Index Fund/US | $26,471,340,000.00 | 127.85 | 0.09 | 14.237 | 1.749344528 |
| QQQQ | Powershares QQQ | $23,408,110,000.00 | 55.92 | 0.2 | 22.083 | 0.644903443 |
| IWM | iShares Russell 2000 Index Fund | $17,768,250,000.00 | 78.97 | 0.2 | 25.582 | 1.13146251 |
| VTI | Vanguard Total Stock Market ETF | $17,594,060,000.00 | 65.68 | 0.07 | 16.223 | 1.747868456 |
ETF Canadian Market
| Ticker | Name | Market Cap | Price | Fees | 1Y Return | Dividend Yield |
|---|---|---|---|---|---|---|
| EWC | iShares MSCI Canada Index Fund | $4,596,753,000.00 | 30.83 | 0.53 | 14.976 | 1.616950956 |
ETF International Market
| Ticker | Name | Market Cap | Price | Fees | 1Y Return | Dividend Yield |
|---|---|---|---|---|---|---|
| EFA | iShares MSCI EAFE Index Fund | $36,771,840,000.00 | 57.6 | 0.35 | 3.732 | 2.425043533 |
| VEU | Vanguard FTSE All-World ex-US ETF | $6,820,287,000.00 | 47.46 | 0.25 | 7.397 | 2.14707133 |
| VEA | Vanguard Europe Pacific ETF | $5,379,575,000.00 | 35.81 | 0.15 | 4.426 | 2.504886778 |
| EPP | iShares MSCI Pacific ex-Japan Index Fund | $4,265,151,000.00 | 46.31 | 0.5 | 11.103 | 3.349425802 |
| VGK | Vanguard European ETF | $2,752,851,000.00 | 48.26 | 0.16 | 0.725 | 4.778284282 |
ETF Emerging Market
| Ticker | Name | Market Cap | Price | Fees | 1Y Return | Dividend Yield |
|---|---|---|---|---|---|---|
| EEM | iShares MSCI Emerging Markets Index Fund | $47,594,400,000.00 | 47.685 | 0.72 | 12.262 | 1.355017258 |
| VWO | Vanguard Emerging Markets ETF | $45,508,440,000.00 | 48.2 | 0.27 | 14.568 | 1.690871364 |
| EWZ | iShares MSCI Brazil Index Fund | $13,087,150,000.00 | 76.78 | 0.65 | 2.508 | 3.656000481 |
| FXI | iShares FTSE China 25 Index Fund | $8,297,140,000.00 | 43.97 | 0.72 | 0.162 | 1.428144098 |
| RSX | Market Vectors - Russia ETF | $2,701,176,000.00 | 38.81 | 0.62 | 17.366 | 0.474104613 |
ETF Real Estate (REIT)
| Ticker | Name | Market Cap | Price | Fees | 1Y Return | Dividend Yield |
|---|---|---|---|---|---|---|
| VNQ | Vanguard REIT ETF | $7,509,153,000.00 | 55 | 0.12 | 28.427 | 3.438181877 |
| IYR | iShares Dow Jones US Real Estate Index Fund | $2,885,063,000.00 | $55.75 | 0.47 | 26.16 | 3.538206126 |
| RWR | SPDR Dow Jones REIT ETF | $1,371,493,000.00 | $60.60 | 0.25 | 27.625 | 2.958404349 |
| RWX | SPDR Dow Jones International Real Estate ETF | $1,446,328,000.00 | $38.43 | 0.6 | 17.383 | 8.806011002 |
| URE | ProShares Ultra Real Estate | $527,574,200.00 | $50.11 | 0.95 | 47.86 | 0.774088395 |
ETF Bonds
| Ticker | Name | Market Cap | Price | Fees | 1Y Return | Dividend Yield |
|---|---|---|---|---|---|---|
| TIP | iShares Barclays TIPS Bond Fund | $19,388,990,000.00 | 107.24 | 0.2 | 5.515 | 2.511233058 |
| LQD | iShares iBoxx Investment Grade Corporate Bond Fund | $13,003,800,000.00 | 108.365 | 0.15 | 8.48 | 4.873744387 |
| AGG | iShares Barclays Aggregate Bond Fund | $11,179,570,000.00 | 105.17 | 0.2 | 5.243 | 3.506356096 |
| BND | Vanguard Total Bond Market ETF | $8,988,750,000.00 | 79.9 | 0.11 | 5.321 | 3.495449119 |
| SHY | iShares Barclays 1-3 Year Treasury Bond Fund | $8,102,808,000.00 | 83.88 | 0.15 | 1.886 | 1.030274244 |
Why Not Add Commodity ETFs to Your Asset Allocation
That is definitely a personal choice but I would rather use a Canadian ETF instead of a pure commodity ETF in my asset allocation. Why is that? Because almost 40% of the Canadian market is represented by commodity related companies. They have oil, gold, silver… you name it! On top of that, the Canadian market has a strong economy and shows great potential for the future. This also smoothes the volatility of a portfolio as pure commodities in your asset allocation will definitely increase the variations.
Another personal reason why I don’t like commodity ETFs is because investing in commodities is pure speculation. A bar of gold never produces a single dime of income. Investors consider commodities in their asset allocation based on the speculation that the price for resources will surge. I prefer going with a Canadian ETF. If you are looking to play with currencies at the same time, you might want to consider XIU, a Canadian ETF following the Canadian market.
But if you really want to include commodities in your ETF asset allocation, here’s the table of the top ETF in that category:
| Ticker | Name | Market Cap | Price | Fees | 1Y Return | Dividend Yield |
|---|---|---|---|---|---|---|
| GLD | SPDR Gold Shares | $56,101,540,000.00 | 133.83 | 0.4 | 20.016 | 0 |
| SLV | iShares Silver Trust | $10,135,990,000.00 | 28.42 | 0.5 | 59.127 | 0 |
| GDX | Market Vectors - Gold Miners ETF | $7,024,554,000.00 | 56.74 | 0.53 | 15.768 | 0.706732452 |
| DBC | PowerShares DB Commodity Index Tracking Fund | $5,073,809,000.00 | 27.22 | 0.85 | 5.832 | #N/A N/A |
| DBA | PowerShares DB Agriculture Fund | $2,683,451,000.00 | 31.57 | 0.85 | 16.883 | #N/A N/A |
6 ETFs and Your Asset Allocation is Over
This sounds almost too good to be true isn’t? In next Monday’s post, I’ll discuss more about how to adjust your ETFs in order to get the right asset allocation for you. As you can see, building a solid ETF portfolio can take only a few minutes.
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