Revised Model Fund Portfolio: Combining Mutual Funds and ETFs
by James B. Cloonan
In the August 2006 AAII Journal, we began a Model ETF Portfolio.
We indicated that it was an experimental portfolio meant for the examination of exchange-traded funds (ETF), which were quite new at the time. While ETFs are still relatively new—few have a 10-year history—we feel we can make some judgments and integrate ETFs into an overall fund portfolio.
In this article
- ETFs and Funds
- Model Fund Portfolio: Selection Rationale
- The Modified Portfolio
- No International Diversification
- Components of the New Model Fund Portfolio
- Funds Sold
- The Market Ahead
Share this article
Facebook
Twitter
E-mail
SeekingAlpha
Stumbleupon
Delicious
LinkedIn
While it is handy to keep traditional mutual funds, ETFs and closed-end funds separate when listing them or reporting on them, an effective fund portfolio should combine them to take advantage of the strengths of each. That is exactly what we have done by making major changes to our Model Fund Portfolio.
Closed-end funds are mutual funds with a fixed number of shares that can only be purchased or sold through exchanges. The share price may deviate from the net asset value (NAV). With a traditional mutual fund, investors buy and sell an unlimited or open number of shares once per day, directly through the fund at the NAV. Exchange-traded funds trade on exchanges like closed-end funds, but the fund also buys and sells shares directly with authorized participants to help keep the ETF market price close to the NAV.
To read more, please become an AAII Registered User or CLICK HERE.
Discussion
I need a good explanation of how to use this aaii information.
thanks
posted 7 months ago by Earl Coming from Nevada
Do you have any thoughts about using a stop loss/ re-entry in conjunction with the model portfolios? Would it have proved beneficial on balance and not just in 2008 to have done so?
posted 7 months ago by Ron Compton from Missouri
I am not a big fan of stop losses in general especialy for micro caps since a slow day can result in a 10% move in both directions due to wide bid/ask spread. In addition a down move does not violate any of our sell rules and may indicate more reason to buy than to sell. James Cloonan
posted 7 months ago by James Cloonan from Arizona
Well thought out. Particuarly note the thinking on international. From time to time international, notably emerging markets, may afford trading opportunities when these stocks get very cheap, I.e. after the EM debacle in 1998.
posted 7 months ago by Maureen Oster from Wisconsin
Parts of the table 1 was not visible on my screen.
posted 7 months ago by George Pettiford from Illinois
I need to know how do you define long term for people over 65 who have money to invest and have steady income so that they do not need to touch their investment in any major way.
posted 7 months ago by Prakash Navare from New Jersey
I have the same questions as Earl from NV and Prakash from NJ. Also would like advice on when to sell individual stocks you recommend such as KTTC, or am I on my own with information overload? Thank you, Joseph
posted 6 months ago by Joseph Competiello from Massachusetts
Hello Mr Cloonan, I have $5k to invest in a Roth IRA and was wondering which were best for income and yield: REIT's, Bond funds or Utilities..I plan on w/drawing the money in 30 yrs..
posted 5 months ago by Jorge Caicedo from Louisiana
Question for Mr Cloonan: Fund Portfolio
CGMRX is closed to new investors- do you suggest we substitute another- if so ,what is your recommendation?
Doug Jackson
posted 5 months ago by Douglas Jackson from California
