Friday, January 6, 2017

Portfolio anchored by mutual funds may outperform an index ETF one

For years I have followed index investing. I was a bit of a believer at one point. But then I noticed some of my pure stock plays were blowing away my index investments. Slowly I moved away from the index model.

Today, my own portfolio is a hodge podge of stocks, ETFs and mutual funds. I have a reason for investing in all the stuff I own but I must admit that all the reasons are not good ones. There are a number of investments I hold that I wish I had never encountered. But even carrying those dogs, my portfolio is in the lead against some index-based benchmark portfolios.

If you are asking, what is your portfolio leading? The answer is the test or research portfolios I have have set up using software available to the users of WebBroker. I moved some of these practice portfolios to the trash at the start of the year because they were performing so poorly. If I had a portfolio in real life that was delivering so little, I would liquidate it and move on.

Based on last year's performance, I created two new portfolios reflecting my current feelings when it comes to portfolios that operate in automatic mode. One is based on a balanced portfolio created with TD e-funds and recommended by a financial expert with a very popular blog. The other contains just four holdings, two mutual funds and two ETFs. For a more detailed rundown on these two approaches to investing click the following link: Running a portfolio in auto mode.

Here is the surprise: the mutual fund anchored portfolio is ahead of the balanced ETF portfolio by thousands of dollars. Of course, this may change. No argument there. But it does give me pause.

One final note: I tried simplify this a bit even more and launched one more test fund. This on based on one and only one ETF, porfolio in itself, a fund of funds. When my first fund of funds came in last, I tried another. It, too, brought up the rear.


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