Model ETF Portfolio: Real Estate Holdings Boost Performance
by James B. Cloonan
Our model portfolio of exchange-traded funds ETFs has now been in existence for four years—four pretty dramatic years. That it has averaged less than 1% a year return would certainly be a disappointment were it not for the fact that most all of the market as well as the benchmarks have negative returns for the four years.
While the Model ETF Portfolio rebounded very well in both of the last two quarters, it has not reached its pre-2008 highs, as can be seen in Figure 1.
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Strengths and Weaknesses
Year-to-date the ETF portfolio is up 8.9% compared to 4.7% for our ETF benchmark.
A major difference between the model portfolio and its benchmark is that our Model ETF Portfolio has a 21% real estate component and the benchmark does not. This hurt relative performance when real estate was hit even harder than the overall market in 2008, but is helping now that real estate has begun to recover. I should point out again that the real estate investments in our two ETFs are mostly real estate investment trusts REITs in diversified commercial real estate holdings and not houses.
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Discussion
It would be interesting to know how you decide to pick the various etf's. To what extent are fund expense, past performance, turnover.... important in your selection.
posted 6 months ago by J Loewenberg from Wisconsin
While the selection process is not as precise as with the Shadow Stock Portfolio, all of the items you mentioned are part of the selection process. Over the next few Fund articles in the Journal we will be discussing the overall process in more detail. James Cloonan
posted 6 months ago by James Cloonan from Arizona
