Building a Bullet Proof ETF Portfolio for Growth and Income David Fabian May 2016
Disclosure The information expressed by FMD Capital Management is for informational purposes only and should not be construed as a recommendation to buy, sell, or hold any specific security. Investing involves the risk of loss and further risk disclosure can be obtained by reading the ETF or mutual fund s prospectus. FMD Capital Management clients may own securities mentioned in this presentation. The illustrations and commentary in this presentation do not constitute individualized investment advice.
Chinese Proverb Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.
Lots Of Fish In The Sea Facebook vs. Twitter (2YR Chart)
Picking Stocks is Hard Amazon vs. Wal-Mart (2YR Chart)
Why ETFs? This is what stock pickers are up against
Bullet Proof What it is. What it is NOT. Simple Low-Cost Dependable Transparent Flexible Fool Proof Guaranteed For Everyone Short-Term Complex
Why I Love ETFs Low embedded costs. Instant diversification. Reliable and transparent vehicles. Tax efficient.
Asset Allocation KISS principle applies. Stocks, bonds, cash. Not everyone is designed to fit in the 60/40 model. Tailor your asset allocation to your risk tolerance. Risk management starts with asset allocation.
Position Sizing 60-80% of your portfolio should be core holdings. Core holding = 10-20% position size. Broadly diversified. Tactical holding = 5-10% position size. Narrow focus. Average into new positions incrementally.
Number of Holdings Don t overcomplicate your life with too many positions. Sophisticated ETF portfolio = 10-15 holdings. Simple ETF portfolio = 5-10 holdings Smaller accounts = fewer holdings.
Building Your Portfolio Core Highly diversified, multi-sector positions. Lowest expense ratios & transaction fees Maintain correlation with stocks or bonds Provide consistency and reliability in your portfolio.
Seek Out ETFs In Your Own Backyard Commission-Free ETFs Fidelity 85 Funds (Fidelity/iShares) Charles Schwab 200+ Funds (Schwab/STT/Guggenheim) TD Ameritrade 101 Funds (ishares/vanguard) Vanguard 55 Funds (Vanguard)
Example: Stock Allocation Fidelity ishares Core U.S. Stock Market ETF (ITOT) Schwab Schwab U.S. Broad Market ETF (SCHB) TD Ameritrade Vanguard Total Stock Market (VTI) Vanguard Vanguard Total Stock Market (VTI)
Example: Bond Allocation Fidelity ishares Core U.S. Bond ETF(AGG) Schwab Schwab U.S. Aggregate Bond ETF(SCHZ) TD Ameritrade Vanguard Total Bond Market (BND) Vanguard Vanguard Total Bond Market (BND) Special Mention: Active management
Customization: Dividends Fidelity ishares Core High Dividend ETF (HDV) Schwab Schwab U.S. Dividend Equity ETF (SCHD) TD Ameritrade Vanguard High Yield Dividend (VYM) Vanguard Vanguard High Yield Dividend ETF (VYM)
Customization: Low Volatility ishares USA Min Volatility ETF (USMV) PowerShares S&P 500 Low Vol ETF (SPLV) SPDR Russell 1000 Low Volatility ETF (LGLV)
Emotion Out Process In
Investor Psychology
Final Words & Action Items Eliminate all high fee mutual funds & annuities from your portfolio. Tune out the media. Be skeptical. Avoid complex strategies and urge to time every blip. Focus on what you can control. Counter-intuitive mindset will be your greatest ally.
Wealth Matrix Wealth Management Portfolio Name Opportunistic Growth Strategic Income Dynamic CEF Income Newsletter Flexible Growth & Income Objective Moderate Growth Moderate Income Aggressive Income Growth & Income Investments Primarily ETFs ETFs & MFs All CEFs ETFs & CEFs Account Minimum $100,000 $100,000 $100,000 Any Custodian TD Ameritrade TD Ameritrade TD Ameritrade Any Asset Allocation More stocks, less bonds More bonds, less stocks High yield bonds and stocks Balanced