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(Bill Grimshaw)
(Bill Grimshaw)

Portfolio Strategy

The ETF building blocks for a solid portfolio Add to ...

ETFs are like investing power tools - you can build something to last with them, or dismember your portfolio.

A good instruction manual would help, and that's just what you're reading right here. Three investing pros have been enlisted to show you how they build portfolios with exchange-traded funds. Observe and then apply what you're learned to your own situation.

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ETFs in simple terms are index-tracking mutual funds that you buy and sell like a stock. They cost much less to own than conventional mutual funds, and you can buy or sell them at any time during the trading day (funds can only be sold at end-of-day prices). ETFs are also very clear in their holdings and mandate, which simplifies the portfolio-building process.

The problem with ETFs is that there are so many different products today, including lots of overlap in the all-important Canadian equity and Canadian bond categories. To keep things simple, then, the three investing pros were asked to build their portfolios using no more than six ETFs.



Investor Education:

  • All about ETFs
  • How to make ETFs part of your RRSP
  • The bad boys of the ETF world
  • Are ETFs your cup of tea?
  • How do ETFs fit my investment strategy at this stage in life?
  • Related contentHow do Exchange-Traded Funds (ETFs) work?




The only other requirement was that the experts use three set asset mixes: 80 per cent stocks and 20 per cent bonds, for aggressive investors; a 50-50 split for middle-of-the-road investors; and a mix of 20 per cent stocks and 80 per cent bonds for risk-averse investors who still want a bit of stock market growth.

ETF Portfolio Blueprints

We asked some experts to build three different kinds of portfolios using six or fewer exchange-traded funds of any type. Here's what they came up with. Note: These portfolios are examples only. You'll need to do your own research to find a mix right for you.

Our experts:

Ioulia Tretiakova, vice-president at PUR Investing

Christopher Young, financial adviser with Manulife Securities

Adrian Mastracci, portfolio manager with KCM Wealth Management

The Safety-First Portfolio: (20% stocks, 80% bonds)

Ioulia Tretiakova:

ETF

Ticker

Weight %

iShares CDN Bond Index Fund

XBB

40

Claymore 1-5 Yr Laddered Government Bond ETF

CLF

40

iShares CDN Value Index Fund

XCV

5

iShares CDN MSCI EAFE Hedged to C$ Index Fund

XIN

5

iShares CDN S&P 500 Hedged to C$ Index Fund

XSP

5

PowerShares DB Commodity Index Tracking Fund

DBC*

5

*listed on the New York Stock Exchange; all other ETFs are TSX-listed

Christopher Young:

ETF

Ticker

Weight %

Claymore 1-5 Yr Laddered Corporate Bond ETF

CBO

30

iShares CDN Short Bond Index Fund

XSB

25

iShares CDN Government Bond Index Fund

XGB

25

Claymore Cdn Fdmtl Index ETF

CRQ

10

iShares CDN MSCI EAFE Hedged to C$ Index Fund

XIN

10


Adrian Mastracci:

ETF

Ticker

Weight %

GIC Ladder: 1-5 years

80

iShares CDN LargeCap 60 Index Fund

XIU

10

ishares CDN Financial Sector Index Fund

XFN

10



The 50:50 Portfolio: (50% stocks, 50% bonds)

Ioulia Tretiakova:

ETF

Ticker

Weight %

iShares CDN Bond Index Fund

XBB

50

iShares CDN Composite Index Fund

XIC

15

SPDR S&P 500 ETF

SPY*

10

Vanguard Euorpe Pacific ETF

VEA*

10

Vanguard Emerging Mkts ETF

VWO*

5

PowerShares DB Commodity Index Tracking Fund

DBC*

10

*listed on the New York Stock Exchange; all other ETFs are TSX-listed



Christopher Young:

ETF

Ticker

Weight %

Claymore 1-5 Yr Laddered Corporate Bond ETF

CBO

25

iShares CDN Short Bond Index Fund

XSB

25

Claymore Cdn Fdmtl Index ETF

CRQ

20

iShares CDN MSCI EAFE Hedged to C$ Index Fund

XIN

20

Claymore Broad Emerging Markets ETF

CWO

10



Adrian Mastracci:

ETF

Ticker

Weight %

GIC Ladder: 1-3 years

50

iShares CDN LargeCap 60 Index Fund

XIU

15

Claymore Cdn Fdmtl Index ETF

CRQ

10

iShares CDN S&P 500 Hedged to C$ Index Fund

XSP

15

iShares CDN MSCI EAFE Hedged to C$ Index Fund

XIN

10



The Aggressive Portfolio: (80% stocks, 20% bonds)

Ioulia Tretiakova:

ETF

Ticker

Weight %

iShares CDN Corporate Bond Index Fund

XCB

20

iShares CDN SmallCap Index Fund

XCS

20

SPDR S&P 500 ETF

SPY*

20

Vanguard Euorpe Pacific ETF

VEA*

20

Vanguard Emerging Mkts ETF

VWO*

10

PowerShares DB Commodity Index Tracking Fund

DBC*

10

*listed on the New York Stock Exchange; all other ETFs are TSX-listed



Christopher Young:

ETF

Ticker

Weight %

Claymore 1-5 Yr Laddered Corporate Bond ETF

CBO

20

Claymore Cdn Fdmtl Index ETF

CRQ

20

iShares CDN SmallCap Index Fund

XCS

10

iShares CDN MSCI EAFE Hedged to C$ Index Fund

XIN

30

Claymore Broad Emerging Markets ETF

CWO

20



Adrian Mastracci:

ETF

Ticker

Weight %

GIC Ladder: 1-2 years

20

iShares CDN LargeCap 60 Index Fund

XIU

20

Claymore Cdn Fdmtl Index ETF

CRQ

15

iShares CDN S&P 500 Hedged to C$ Index Fund

XSP

20

Claymore US Fundamental ETF - US$ Hedged

CLU

10

iShares CDN MSCI EAFE Hedged to C$ Index Fund

XIN

15



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