We have a select list of Exchange Traded Funds (ETFs) that we use for our portfolios. I have screened these funds for their internal fundamentals and holdings, as well as, long-term performance metrics. These are the funds that have done the best over time and are positioned to continue doing well in a changing world. These are great tools for building a tactically diversified portfolio or as bolt on holdings for a stock portfolio.
Refer to the grids below to see the Exchange Traded Funds – ETFs – that we are considering investing in. In each chart will be the fund name, symbol, buy range and a very brief rational for our bullish interest or general notes. There will generally be stocks in 20 to 30 ETFs in addition to the SPY, QQQ, DIA and SPDR Selects which are the core I build around. We also use a few Closed End Funds – CEFs.
Using Limit Orders
We extensively use “limit” orders to set up buys. This beats sitting around in front of a computer watching green and red numbers that mean little to nothing. The price you set your buy limits at will depend on your risk tolerance, outlook and investment approach. The buy range is based upon fundamental and technical factors which I have made far more conservative due to the decreasing demand for financial assets by baby boomers, which is a massive sea change in the investment world, and that threatens to cause greater volatility.
Make sure to read the How We Trade & Invest page.
The buy price ranges are consistent with looking for a blend of margin of safety and investment opportunity. The lower you buy, obviously the greater margin of safety. You need to answer for yourself how much safety you need.
In general, I recommend buying a small starter position near the high-end of the buy range and a bigger position at the bottom of the buy range. By establishing a buy limit near the high-end of the buy range, you can often gain as these holdings are recognized as valuable and don’t generally trade low for long.
The lower-end of the buy range recognizes that markets have become more fragile and more likely to exemplify extreme behavior relative to the past – consider the 1000 point “flash crash” on the Dow on August 24th, 2015. It is okay to only buy the low-ends of the buy range and simply wait for the very bad days and weeks to be a buyer. In fact, I think that is a great strategy for patient investors looking to manage risk.
I am listing the “Bull Rationale” for these ETFs. You should search out the bear scenarios before investing and consider those.
These ETFs are used for the Global Trends ETF portfolio and Quarter Million Dollar portfolio which are position trading portfolios (most holdings are for a year or more). Swing Trading Opportunities, generally using options on these ETFs, as well as, a wider range of ETFs are primarily technical based, so, those do not appear on this page. To Swing trade, generally with holding periods from a few weeks to a few months, you should have experience or start very small.
I use a 2 year rolling quant system combined with valuation measures to establish these ranges. Many of the ranges are rolling upward right now. I think it is prudent to look for buys near the bottom of the ranges, not the top, given the length of this expansion and what I believe are mounting geopolitical risks. You can do what you want, however, if you choose to buy near the upper end of the ranges, I very strongly suggest smaller incremental purchase sizes. This will result in a more spread out approach to averaging and is a little more work, but I believe is necessary to maintain “margin of safety.”
New in yellow.
See the Research section and Forum for research on various ETFs we are investing in.
|iShares MSCI All Country Asia ex-Japan||AAXJ||47-56||About evenely split between emerging and developed Asia which is where a lot of growth will be the next decade.|
|Market Vectors Africa||AFK||15-18||Fast growing due to youth, prior underdevelopment and resources. Very volatile.|
|Market Vectors Biotech||BBH||94-104||Top performing large cap biotech fund, 27 holdings, concentrated|
|Central Fund of Canada||CEF||10.50-11.80||2/3 gold bullion, 1/3 silver bullion, useful if we get another QE|
|WisdomTree SmallCap Dividend||DES||58-72||Smallcap dividend payors which indicates health, rebalanced for value. Should do well during a Trump Presidency and with stronger dollar.|
|SPDR Dow Jones Industrial Average||DIA||158-186||Dow Jones Industrial Average|
|Global X SuperDividend U.S.||DIV||17-22||High dividends across various equities, inlcuding MLPs and REITs.|
|WisdomTree MidCap Dividend||DON||74-88||Midcap dividend payors which indicates health, rebalanced for value. Should do well during a Trump Presidency and with stronger dollar.|
|iShares MSCI Australia||EWA||17-20||Will benefit from oil/commodity rebound and proximity to China.|
|iShares MSCI Canada||EWC||19-23||Will benefit from oil/commodity rebound and proximity to U.S.|
|iShares MSCI Switzerland||EWL||29-32||Some very good companies in a favorable jurisdiction if ever it becomes cheap.|
|iShares MSCI Mexico||EWW||43-49||Will benefit from youth, tourism, proximity to U.S. however will be volatile|
|First Trust ISE-Revere Natural Gas||FCG||19-24||Index is reconstituted towards stronger survivors in the field. Look to enter before summer cooling season.|
|iShares China Large-Cap||FXI||28-34||Includes TenCent as top holding so getting tech exposure along with large caps to be included in more emerging market indexes soon.|
|Market Vectors Gold Miners ETF||GDX||13-20||If central banks print more to stimulate, becomes very attractive. Due for a pullback. Miners > physical gold now that many miners have restructured and survived.|
|SPDR Gold Shares||GLD||95-118||100% gold bullion, useful if we get another QE|
|iShares Nasdaq Biotechnology||IBB||241-270||All-cap biotech though weighted large cap, 2nd best performing, 190 holdings|
|iShares India||INDA||24-27||Young, developing infrastructure, tech savvy and fast growing though likely for a slowdown short-term. We want to build a long-term position in India. Modi’s reforms are going well as could be expected. We’ll want to use key levels to buy.|
|iShares Russell 2000||IWM||94-116||Russell 2000 SMID cap|
|iShares US Telecommunications||IYZ||27-32||With the Trump admin attack on “net neutrality” this group appears to be well positioned. I chose this ETF because it is heaviest in CTL exposure which I believe will benefit from its merger to Level 3. Pays a good dividend.|
|SPDR Barclays High Yield Bond||JNK||32-35||Good source of income after major corrections|
|iShares MSCI China||MCHI||37-43||Core difference with FXI holdings is that this includes more tech and Alibaba|
|PowerShares Agribusiness||MOO||42-47||Food which is a derivative play on water|
|PowerShares HY Equity Dividend Achievers||PEY||13-16||Strong dividend paying companies which has been a historically strong strategy|
|PowerShares Buyback Achievers||PKW||40-48||About the only thing holding stocks up have been buybacks|
|PowerShares FTSE RAFI US 1000||PRF||77-87||Strong dividend and fundamental weighted alternative to S&P 500 Index or Vanguard Total Market|
|PowerShares Russell MidCap Pure Value ETF||PXMV||23-30||Heavy financials, energy, real estate, utilities and industirals. Will do well in growing economy with rising rates (if that’s what we get). Compares well to DON.|
|PowerShares QQQ||QQQ||94-118||Nasdaq 100, very good somewhat diversified performer, easy to write options on|
|Guggenheim S&P 500 Pure Value||RPV||43-54||Low cost value approach with strong dividends and very good history|
|SPDR S&P 500||SPY||186-210||S&P 500 Index, large cap benchmark|
|Guggenheim Solar||TAN||14-18||High growth sector with government support becoming more competitive every month with conventional energy. Appears to be bottoming.|
|iShares 1-3 Year Treasury Bond||SHY||83-85||Short-term parking place.|
|ProShares Short VIX Short-Term Futures||SVXY||30-60||Deteriorates in our favor. Worth buying off of big volatility spikes. Leveraged, so don’t trade.|
|iShares 20+ Yr Treasury Bond||TLT||112-120||Where the money will go on a flight to safety. Great alternative for parked money waiting for correction.|
|DB U.S. Dollar Index Bullish||UUP||23-24||Setting up for reversal higher on global volatility and significant rally, however, carries long-term risk. Bond alternative for short and intermediate periods of volatility.|
|Van Eck Vietnam||VNM||13-16||Strong demographics and a leading frontier economy. A lot of room to grow. Proximity to China. Maybe next South Korea in a generation. Coming off a large correction.|
|Vanguard FTSE Pacific||VPL||50-58||Developed Asia region with significant Japan exposure.|
|iPath S&P VIX Short-term Futures||VXX||12-14||Volatility likely to pick up summer 2017. Approaching our buy target range. Remember, this is for trading over several days at a time only. Use only for binary events, i.e. GDP, employment, earnings numbers that might miss in short order.|
|SPDR S&P Oil & Gas Equipment & Services ETF||XES||16-18||Can substitute OIH or IEZ if you prefer market cap weighted, i.e. heavier towards large caps.|
|SPDR Select Materials||XLB||37-45||Far off. Overpriced.|
|SPDR Select Energy||XLE||54-63||Setting up for rally after retrace.|
|SPDR Select Financial||XLF||17-21||Rising risk. Rally was way overdone. Caution.|
|SPDR Select Industrial||XLI||47-57||Flat due to slow growth and rising wages. Trump trade very overdone.|
|SPDR Select Technology||XLK||35-45||Where the innovation and new profits are. Would love to get in the 30s. Think about tech free cash flow, they can make more money without adding much investment to their business due to scalability.|
|SPDR Select Consumer Staples||XLP||45-51||Flat to slighly rising due to slow growth but rising wages. Will improve due to Millennial household formation.|
|SPDR Select Utilities||XLU||41-45||Strong short-term, however, long-term risks, I really don’t like utilities due to all the capex. Starting to get equiv dividends in tech.|
|SPDR Select Health Care||XLV||53-62||Long-term growth opportunity, but beware of politicians with axes, i.e. Trump. I much prefer biotech.|
|SPDR Select Consumer Discretionary||XLY||66-82||Near top of current cycle, buy on pullbacks. Leading brands usually lead recoveries.|
*I generally use * I use the SPDR Select Sector funds due to the extra liquidity and option liquidity, however, the Vanguard and iShares equivalents are often virtually identical and can be used in the SPDR’s place if your brokerage offers lower trading commissions on those.