Friday, January 6, 2017

Portfolio anchored by mutual funds outperforms index ETF portfolio

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 and even 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 again this year.

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 the Vanguard balanced portfolio 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 surpirse: the mutual fund anchored portfolio is ahead of the balanced ETF portfolio by hundreds of dollars. It is too early to say that this early trend will continue but I can say that this does continue a trend that started early last year.

Stay tuned. I may simplify this a bit more by launching one more test fund. This one would be based on one and only one ETF. Of course, this ETF will be a porfolio in itself, a fund of funds as they say. I've watched this fund of funds ETF for year and  think it may be ready for prime time.


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