Perfect 5 Portfolio | Click to Expand Live Table
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The Perfect 5 ETF Active Passive Portfolio:
ETFs, Exchange Traded Funds, have exploded to become more popular than mutual funds. These baskets of stocks, usually linked to an index, allow you to trade intraday as you do with a stock instead of having to wait for the end of the day for a mutual fund to price.
Because ETFs allow you to buy things like the whole S&P 500 with one buy at a low cost, they have become very popular with passive investors building portfolios. At the same time, the number of ETFs that are geared to traders has grown by leaps and bounds. You can buy an ETF that owns a basket of tech stock leaders for example (Facebook, Amazon, Netflix and Google – the FANG stocks), or that is concentrated in natural gas.
My portfolio looks to combine the two approaches by concentrating on the construction of big passive portfolios using mainstream ETFs – such as the SPDR S&P 500 ETF – but that also gives advice on shifting allocations among these mainstream ETFs as market conditions suggest. For example, an S&P 500 ETF gained 10.31% from January through September 2017. A tech heavy NASDAQ ETF would have gained 14.18%. I don’t know about you, but a 40% swing is important to my portfolio.
Perfect Five Portfolio Allocation:
(Rebalanced July 19, 2022)
- Commodities – MOO 30% 30%
- Fixed Income – UUP 25% 25%
- Utilities Dividend Income – XLU 20% 20%
- Emerging Market Stocks – EUM 15% 15%
- U.S. Domestic Stocks – IVV 10% 10%
I’m making a switch today (well, actually tomorrow) in the Perfect 5 ETF Portfolio Out goes the iShares Large Cap China ETF (FXI). In comes the ProShares Short MSCI Emerging Markets (EUM). My weighting remains the same at 15% of the five-ETF portfolio.
I’m firmly in the negative camp on emerging markets. If you want to profit from the downward move in these markets, I see two options: one is investing in a fund that shorts emerging markets, like EUM. Or, two, you can buy put options on a fund like EMXC (which tracks emerging markets minus China). There are benefits and downsides to each approach.
In my July 7 YouTube video: “Quick Pick UUP” I added the Invesco DB U.S. Dollar Index Bullish Fund (UUP) to my Perfect 5 ETF Portfolio. (To replace the Consumer Staples Select Sector SPDR ETF (XLP) in that portfolio. More on that in another post today.) Today I’m also going to add this dollar ETF to my Volatility Portfolio and to my Jubak Picks Portfolio. I’m setting a target price of $33.20 in the Jubak Picks Portfolio. You should take the fact that I’m adding a dollar position to three portfolios as an indication of how strongly I feel about a continued strong dollar.
My one-hundred-and-fifty-fifth YouTube video “Quick Pick UUP Dollar ETF” went up today. In my video yesterday (if you missed it, go watch!) I explained why a strong dollar has hit commodity stocks hard, and why I think the dollar will continue to be strong. One strategy I suggested: Investing in an ETF that tracks the dollar. My recommendation here is Invesco Dollar Index Fund (UUP). I’ll be adding it to my ETF Portfolio on my JubakAM.Com subscription site on July 8.
Today, Tuesday May 17, China’s top economic official, Vice Premier Liu He, said that the government will support the development of digital economy companies and their public stock listings. The comments delivered after a symposium with the CEOs of some of the country’s largest private technology companies came just a day after the National Bureau of Statistics reported that industrial output fell 2.9% in April from April 2021, and that retail sales contracted 11.1%. Financial markets in China and the United States interpreted the remarks as a public show of support for China’s Internet companies
Replacing Invesco Bank ETF with Consumer Staples ETF in my Perfect 5 ETF Portfolio; increasing commodities weighting
Back on April 11 when I “trimmed” my bank stock positions in my Jubak Picks Portfolio ( https://jubakam.com/trimming-bank-st…wfc-and-kbwb-etf/) by selling Wells Fargo (WFC) and the Invesco KBWB Bank ETF, I said I’d sell that ETF out of my Perfect 5 ETF Portfolio when I had a replacement ETF to offer. Today I’ve got a replacement to recommend and I’m selling the Invesco Bank ETF out of that portfolio. The replacement is the Consumer Staples Select Sector SPDR ETF (XLP).
This week’s Quick Pick is a utilities ETF, XLU. Utilities are a good place to turn to for the next few months before we hit a full recession slowdown. This ETF has a lot going for it, including a strong upward trend, a low expense ratio, and a good yield. As utility companies continue to invest in capacity, they are allowed to increase their rate base, which means revenue will keep going up. I own this ETF in my Perfect 5 ETF Portfolio on JubakAM.com, where it’s been up 43% since 2018.
Yesterday, March 15, I was thinking that I wished I didn’t own any China stocks at all. Today, March 16, I wished I owned more. Lot’s more.
I’m starting up my videos again–this time using YouTube as a platform. My ninety-first YouTube video “QuickPick: FXI China ETF” went up today.
Today, the People’s Bank of China cut its key interest rate for the first time in almost two years to help support China’s economy. The People’s Bank of China lowered the rate at which it provides one-year loans to banks by 10 basis points. Not a huge move–100 basis points equals one percentage point–but earlier than many economists–and I–had anticipated.
In other years this would clearly be the time to jump into China stocks. What we have right now is a classic, tried-and-true set up for big gains from buying China stocks. With a “but” or two that suggests a cautious strategy. But I will be buying shares of Tencent Holdings and the FXI ETF on Monday, January 3.
Today on the market’s recalculation of the Federal Reserve’s schedule for interest rate increases–initial hike in June instead of September and two increases 2022 instead of one–I’m adding my allocation to the Invesco KBWB Bank ETF (KBWB) in my Perfect 5 ETF Portfolio to 30% from the prior 20%.
On what looks like solid odds for interest rate increases in 2022, I’m selling my remaining Treasury ETFs out of my portfolios.
t’s tempting right now to say “To hell with diversification; let’s put everything into U.S. stocks. After all, they’re outperformed most asset classes for most of 2020 and for the year to date.” That’s exactly the kind of thinking, however, that gets an investor into trouble when an asset class is trading near a historic high. A time like this, like now, is exactly when you should be looking to make sure that you’ve got decent balance in your portfolio. And, to the degree you can, own stuff that will go up when other stuff goes down. Which is why I’m adding shares of the Van Eck Agribusiness ETF (MOO) to the Perfect 5 ETF Portfolio today
What are the effects on stocks of China’s economic slowdown? Doing some selling of copper ETFs today
On Monday the Chinese government reported that the country’s economy slowed more than expected in July. Retail sales were crimped by tough new virus restrictions introduced toward the end of the month to contain fresh outbreaks. Retail sales rose by 8.5% near over year. Analysts had expected growth of 10.9%. Industrial production to a 6.4% year over year increase instead of the 7.9% in economist forecasts. Investment in fixed assets rose 10.3% year to year in the first seven months of 2021 against expectations for an 11.3% increase. No big secret about the effects. China’s economy is the driver for global demand for commodities such as copper. And for demand for some key manufactured goods such as chips.
It’s the problem that won’t go away if you’re looking to build a diversified portfolio of ETFs (or any other asset) to manage the risk that some one asset class will implode unexpectedly. Given the continued outperformance of U.S. stocks, How do you diversify toe manage risk without giving up too much in current performance?
That didn’t take long. On Thursday the Federal Reserve reported that all 23 big banks tested in its annual stress test, passed. Which means that the last remaining restrictions on dividend increases and share buybacks are now history. Yesterday big banks started to announce dividend increases
U.S. banks that pass their next stress tests will be allowed to raise their dividends after June 30, the Federal Reserve said on March 25
I’m starting up my videos again–this time using YouTube as a platform. The thirteenth YouTube video “2 Hedges for All Your Market Worries” went up today.
Just so we’re all on the same page: My buy of CPER and KWBW hedges posted yesterday and an add of the KWBW hedge to the Jubak Picks Portolio today
Yesterday in my YouTube video and in my latest addition to my Special Report: “Profit and Protect” I added the U.S. Copper Fund ETF (CPER) and the Invesco KBW Bank ETF (KBWB) to my Perfect Five ETF Portfolio. In that portfolio they will replace the SPDR Gold Trust ETF (GLD) and the Vanguard Intermediate Term Treasury Bond ETF (VGIT), respectively. The two new ETFs will keep the portfolio weighting of the out-going ETFs at 25% and 20%, respectively. You can find more about the logic of these hedges and about the specifics of these ETFs in my video and in my Special Report update. Tomorrow I’ll also be adding the Invesco KBW Bank ETF to my Jubak Picks Portfolio.
Spot gold hit an all-time high today to close at $1991.40 an ounce. In July gold rose 11%, the most since 2012. And now even investors and traders who never own gold are looking at the metal and say, “Should I buy? Will it rally some more?” In my opinion it’s late to jump on the band wagon. Gold isn’t about to correct, at least not in the short term, but the big driver for higher gold prices–the weak U.S. dollar–looks closer to a reversal than to another extended move lower. For the near term, I’d look to be a seller with an eye toward buying when the dollar has played out a limited upward move.
People’s Bank says it will resort to “more powerful” policies to stimulate China’s economy but leaves details vague
Think of it as a first step toward a policy move and not as an actual plan for action. In its quarterly monetary policy report released Sunday, the People’s Bank of China said it will resort to “more powerful” policies to counter unprecedented economic challenges from the coronavirus pandemic. The central bank will “work to offset the virus impact with more powerful policies,” paying more attention to economic growth and jobs while it balances multiple policy targets. One key absence in the report: The bank dropped its earlier promise to “avoid excess liquidity flooding the economy” from the fourth quarter of 2019.
The Japanese yen soared 2% Monday after the Federal Reserve announced that it would cut interest rates and add $700 billion to its balance sheet by buying Treasuries and mortgage-backed securities.
Usually gold, a safe haven, time-of-fear asset, rises when stocks stumble and worries climb. Not during last week’s big sell off in stocks. Then gold and gold stocks moved down along with stocks.
Gold is supposed to go up when investors and traders are looking for safe havens and hedges against market volatility. So it makes sense the gold and gold mining stocks are gaining as coronavirus stalks through the land. Gold closed up 0.99% today to $1570.50 an...
I don’t know whether you’ve been able to hear it over all the other market noise–All the shouting on Brexit, for example–but there is a distinct and increasingly loud call from Wall Street that 2020 is the year to get back into emerging market assets. I don’t happen to agree with a lot of the thinking about why this is a good move now–but I think the crescendo of sentiment makes it dangerous to stand in the way of these bulls.
I bought this position in the Pro Shares Short 7-10 Year Treasury ETF (TBX) in my Volatility Portfolio on February 2, 2018, back in the days when it looked like the Federal Reserve was firmly locked into a policy of interest rate increases. An interest rate increase pushes down the prices of existing bonds with lower coupon yields–which would produce gains for an ETF like this short Treasury bonds. With the Fed’s reversal of policy course at the end of 2018 and with an interest rate cut almost certain at the Fed’s July 31 meeting, being short Treasuries no longer makes sense. I’ve been adding long Treasury ETFs since the beginning of June while looking for a time to exit this short ETF.
Despite the challenging words from Fed chair Jerome Powell pledging that that he will serve his full term, I think it’s likely that the Trump White House sees the continued shift of the Federal Reserve from raising interest rates to neutral to a bias toward interest rate cuts in 2019 as a sign that the Federal Reserve is yielding to political pressure from President Donald Trump. My observation of this administration leads me to conclude that when Trump thinks he sees a weakness in his opponent, he ramps up the pressure. Winning re-election in 2020 depends to a large extent on the health of the U.S. economy, which increases the President’s motivation to press the Federal Reserve to cut interest rates in 2019.
Buying this Vanguard Treasury ETF on Monday for my ETF Portfolio–and for my Jubak Picks and Volatility portfolios
Today I sold the iShares MSCI Emerging Markets ETF (EEM) out of my Perfect 5 ETF Portfolio on my JubakAM.com and JugglingWithKnives.com subscription sites. And today I’m replacing it in that portfolio with the Vanguard Intermediate Term Treasury ETF (VGIT). I’m also adding it to my JubakPIcks and Volatility Portfolios.
In an ideal world, I would have finished my Special Report on the Crisis in Global Capitalism on my subscription JubakAM.com site by now so I could place this sell–and the coming buy of a Treasury ETF–in the context of that crisis. But this isn’t an ideal world.
Here’s one set of ETFs I’m watching right now for signs that the market is headed for a breakdown–and reassurance that it’s just trapped in one of those rotation things. On Monday, May 20, the Technology Select Sector SPDR ETF (XLK) fell like a stone, dropping 1.74% as technology companies in the United States moved to cut off sales to China’s Huawei Technologies after the White House imposed sanction on that company. The Financial Select Sector ETF (XLF), however, moved ahead slightly
Yesterday in a post “One consequence of change in Fed policy likely to be a weaker dollar” I noted that a number of Wall Street and big international banks have forecast a drop in the dollar as a result of the Fed’s decision to back off on raising interest rates in 2019. Morgan Stanley, for example, says that the dollar has peaked and has forecast the yen climbing to 102 to the dollar and the euro to $1.31 by the end of 2019. Japan’s Nomura is projecting foreign selling of dollars. Today I’m adding the Invesco CurrencyShares Japanese Yen ETF (FXY) to my Jubak Picks portfolio. (The ETF is already part of my Perfect 5 ETF Portfolio.)
Gold hit a seven month high on Friday, gaining more than 1%. Spot gold briefly broke above $1300 an ounce. Gold futures climbed 1.5% to $1,298.30 an ounce. The SPDR Gold Shares ETF (GLD) climbed 1.46% to $122.86 on volume 10% above the daily average. The 52-week high for this ETF is $129.47. The SPDR Gold Shares ETF is a member of my Perfect 5 ETF Portfolio. I increased the allocation to GLD to 25% of this 5-ETF portfolio on December 26.
Why I can’t put away my bear market worries #3: Money flows that look like a bounce and not like a rally
Rallies share one very important pattern. In a rally more investors and traders want to jump in as prices rise. They’re convinced that rising prices mean that prices will climb even more in the future and so they buy, driving prices higher. Bounces follow a different pattern.
On December 27 I switched to the Invesco Currency Shares Japanese Yen ETF (FXY) from the Vanguard FTSE Developed Markets ETF (VEA) in my Perfect 5 ETF Portfolio in an effort to get more yen exposure and a little more safety during this Bear market. Tomorrow I’m going to add this ETF to my Jubak Picks and Volatility Portfolios for the same reason. I don’t think the gains from this ETF will be eye-popping during the Bear–I’d be happy with 5%–but this does look like one of the few places to park money right now that promise any gains and solid safety.
European markets sink into bear today; I switching back to yen and selling the euro in my ETF Portfolio
Back on October 3 I switched from the Invesco Currency Shares Japanese Yen ETF (FXY) to the Vanguard FTSE Developed Markets ETF (VEA) in an effort to get a little more performance out of this slot in my Perfect 5 ETF Portfolio. (This ETF invest in both Japan and Europe.) And for a little while it worked–about a month I’d say–as the euro picked up strength against the U.S. dollar. But for the last month as European stocks have slipped into a bear, this positioning in my ETF Portfolio has just not worked. Japanese stocks themselves moved into a bear market on Christmas but the yen looks like it will again gain from its role as a safe haven currency in times of turmoil. (And especially in times of turmoil for the U.S. dollar.)
Now that the Federal Reserve has decided to slow the pace of its interest rate increases in 2019–perhaps ultimately all the way to one or none–I think it’s time to up the utilities exposure in my Perfect 5 ETF Portfolio. Especially since in this market I’m looking for safety.
Don’t know whether or not you’ve noticed, but stocks have been sinking like a stone. (Actually I sure you’ve noticed that.) And that gold has been climbing. (This you may have overlooked in all the other excitement.) The Federal Reserve signal that it is backing off on its schedule to raise interest rates three times in 2019 to a more likely pace of two increases (and quite possibly one or none) has removed the worry about a quick boost in interest rates that has been weighing on gold prices. The SPDR Gold Shares ETF (GLD) is up 5.6% since closing at $113.66 on November 12, 2018. The ETF closed today, December 24, at $120.02.
Earlier today I sold the Invesco Currency Japanese Yen ETF (FXY) in my Perfect 5 ETF Portfolio. Now I’m replacing it with the Vanguard FTSE Developed Markets ETF (VEA). The sell and the buy will cut the portfolio’s exposure to the Japanese yen and increase its exposure to the euro at a time when market sentiment seems to be moving toward the euro as an alternative to the U.S. dollar.
As I wrote in the Bonus ETF section of my recent Special Report: 10 Picks for the Emerging Market Bounce on my JubakAM.com subscription site, I’m selling the Invesco Currency Shares Japanese Yen ETF (FXY) out of my Perfect Five ETF Portfolio. I added this to the portfolio on July 17, 2018
It’s certainly time to ask this question.
The September 26 meeting of Federal Reserve’s Open Market Committee made a December 19 interest rate increase just about a done deal. In the dot plot released after that meeting, the Fed also signaled its intention–pending news, of course–of raising interest rates 3 times in 2019. I think it’s fair to say that we’ve got an important visible trend here that needs to be factored into the way you allocate the money in your portfolio among asset classes. For example, the trend just about guarantees that investments in bonds and other fixed income assets face a challenging environment over the next year.
There’s some evidence that the money that has left big U.S. tech stocks such as Facebook (FB), Netflix (NFLX), Microsoft (MSFT) and Amazon (AMZN) on some recent days has been headed into big Chinese tech stocks such as Tencent Holdings (TCEHY), Alibaba (BABA), and Baidu (BIDU.) You could find that pattern in evidence today when the Technology Select Sector SPDR ETF) was up 1.15% and the Invesco China Technology ETF (CQQQ) climbed 3.49%. Tencent gained 5.22%. Alibaba was ahead 2.52%. Baidu moved up 1.71%. It’s not hard to find reasons for the possible rotation into big Chinese tech stocks.
I know it looks like nothing much happened in the U.S. stock market today, Thursday, September 6. After all the Standard & Poor’s 500 stock index was off just 0.37% and the Dow Jones Industrial Average was actually head by 0.08%. But below the surface, there was increased weakness today that leaves me concerned.
Remember that emerging market crisis that whacked 10% out of the iShares MSCI Emerging Markets ETF (EEM) between July 31 and August 15–and even produced some anxiety in U.S. markets as the Standard & Poor’s 500 fell 2.1% from August 7 through August 15? Well, it’s back. (If, that is, it ever really went away.) The locus of the crisis is exactly the same: Argentina and Turkey.
Following my own recommendation in my Special Report 5 Places to Hide from a Downturn–and Still Make Some Money I’m adding “Invesco CurrencyShares Japanese Yen ETF (FXY) to my Perfect 5 ETF portfolio today.
I’m continuing to revise the holdings in my Perfect 5 ETF Portfolio in order to reduce risk from the effects of a global trade war and yet to still make some money–as I outlined in my Special Report: 5 Places to Hide from a Downturn–and Still Make Some Money.
I picked the Utilities Select Sector SPDR ETF (XLU) as one of my five buys in my recent Special Report: “Five Places to Hide from a Downturn and Still Make Some Money” on my JubakAssetManagement.com site. And today I’m adding it to my Perfect 5 ETF Portfolio. As I wrote in my Special Report, “Don’t know whether you’ve noticed but recently utilities stocks have climbed, mostly, when the Standard & Poor’s 500 has droppe
As I outlined in my recent special report “Five Places to Hide from a Downturn–and Still Make Some Money” on my JubakAssetManagemnt.com site, I think worry over the added downside potential for stocks created by everything from the tariff war, to higher interest rates, to slowing economic growth in key regions makes utilities a better choice than bank stocks for the income slot in your portfolio. Over the last few weeks I’ve noticed that when fear rises–not to panic levels but still significantly–money flows into utilities and that sends the price of utility shares higher. Consequently today I’m selling the Invesco KBW Bank Portfolio ETF (KBWB) out of my Perfect 5 ETF Portfolio.
If you can’t tell from the cascade of negative commentary, you certainly should be able to tell from trend in share prices: emerging markets have become the focus of current worries about global trade, the effects of a strong dollar, and the potential for a credit crunch that often comes at this stage in the credit cycle. Add in political tensions that range from political interference with the central bank in Turkey, to fears of a “populist” winning the presidency in Mexico, to dread that Brazil’s election will descend into chaos and you’ve got serious downside pressure on emerging market stocks.
Global crude fell today after reports that the the U.S. government has asked Saudi Arabia and some other OPEC producers to increase oil production by about 1 million barrels a day. That has sent the international benchmark Brent crude down 0.41% as of 1 p.m.New York time. The U.S. benchmark West Texas Intermediate climbed 0.49%.
The good news is that the European Central Bank, thanks to the global financial crisis and the Greek debt crisis, has mechanisms in place to support Italian bonds, Italian banks, and the Italian financial system. The bad news is that an Italian government has to ask for that help after swearing to be fiscally responsible. At the moment there is, once again, no Italian government. A bid by the populist parties that came in ahead of the field in the latest election was rejected by Italy’s president. And these parties aren’t likely to meet the European Central Bank’s requirements for help.
Of the five ETFs in my Perfect 5 ETF Portfolio only one has outperformed the S&P 500. Since I added it to the portfolio on October 5, 2017 the PowerShares KBW Bank Portfolio ETF (KBWB) has gained 11.01% through 3:30 p.m. on May 22.
The financial sector is up again today with the Financial Select Sector SPDR ETF (XFL) up 0.96% as of 3 p.m. New York time. This continues a strong May run for the sector that has seen the ETF climb 5.6% from May 3–after the sector spent there period from March 23 to May 3 building a base.
All is right in tech land again, cash flows say. Last week investors and traders poured $670 million into the Technology Select Sector SPDR ETF (XLK). That’s the most in a year for the second largest technology ETF. Apple (AAPL) is the largest position in the ETF with a 15% weighting.
Fed leaves interest rates unchanged, seems to signal continued gradual interest rate increases for rest of 2018
As expected by the financial markets, the Federal Reserve left interest rates unchanged at today’s meeting of the Open Market Committee. As expected the Fed didn’t really clarify its stance on inflation and interest rate increases, acknowledging inflation is close to target without indicating any intention to veer from their gradual tightening of monetary policy. But it left open the possibility that it might be willing to let inflation creep over 2% in the short run and for a short period of time
Goldman Sachs has turned positive on gold for the first time in five years. “Our commodities team believes that the dislocation between the gold prices and U.S. rates is here to say,” Goldman Sachs says. Drivers for higher gold prices include signs of an uptick in inflation and increased risk in equity markets.
When I last rebalanced my Perfect 5 Active Passive ETF Portfolio on January 16, I said that I’d rebalance it again on July 1–unless events intervened to force an unscheduled rebalancing. Well, events have indeed intervened. The S&P 500 index closed within a handful of points of the February 8 low today, March 23. If the index and the U.S. stock markets were only going to drop another few points and then hold (or even bounce on that low), I wouldn’t feel the need to rebalance. But there’s a good chance the market will fail its test of the February 8 low.
If you spend a significant part of your day staring at your computer to watch the markets, you know that, perplexingly, the traditional safe havens for mitigating portfolio risk haven’t been working very well. Now Goldman Sachs has put its computers and data crunchers to work and has reached the same conclusion as the anecdotal evidence suggested. Goldman has tagged this a period of “diversification desperation.”
We’ve had a big influx of new readers here at JubakAM.com and JugglingWithKnives.com thanks to the magic of groundhogs and our Groundhog Day 20% off deal. And I’ve received a number of questions that boil down to How do I get started using the five portfolios on the site? Here’s my advice.
Gold held by ETFs that invest in the yellow metal rose to 2,250 metric tons on January 22, according to Bloomberg. That’s the highest level of gold held by ETFs since May 2013. After turning in its best year since 2010 in 2017, gold has continued to climb in 2018