ETFs and Index Funds in Our Portfolio

1stmilliondollar — Fri, 12 Mar 2010 01:20:15 +0000

We have just added a new page in our blog, called Portfolio. You can access it from the links at the top of our blog. This page contains the complete picture of our portfolio. As we mentioned in our previous posting, we use ETFs and index mutual funds. We also use dollar-cost averaging in our retirement account. Lastly, we try to keep our portfolio as simple as possible.

15% US Index

PowerShares QQQ Trust, Series 1 ETF (NASDAQ:QQQQ)
BlackRock Enhanced Capital and Income Fund (NYSE:CII)

15% Canadian Index

CIBC Canadian Index (CIB300)

15% Emerging Market Index

Claymore Canadian BRIC ETF (TSE:CBQ)
Market Vectors Brazil Small Cap ETF (NYSE:BRF)
Claymore/AlphaShares China Small Cap ETF (NYSE:HAO)

30% Fixed Income

TD Canadian Bond Index (TDB966)
iShares iBoxx High Yield Corporate Bonds ETF (NYSE:HYG)
PowerShares Financial Preferred Portfolio ETF (NYSE:PGF)

5% REIT

Vanguard REIT ETF (NYSE:VNQ)
iShares Canadian S&P/TSX Capped REIT ETF (TSE:XRE)

Notes

For the US index, we basically invest in Nasdaq-100 and S&P 500. We use a closed-end funds (CII) for S&P 500 because of its dividend. Check also our posting here for a couple of different closed-end funds that replicates S&P 500.
Although Canada represents only 2% of the world GDP, we maintain a pretty high percentage of Canadian index. Why? It’s just because we live in Canada. Our “native” currency is Canadian dollar.
We know that CIBC Canadian Index might not be the best mutual funds. However, we have to keep it this way until end of next year.

Comparing Closed-end Funds that Replicates S&P 500′s

1stmilliondollar — Fri, 05 Mar 2010 03:03:28 +0000

We mentioned in our previous posting that we allocate a small amount of our portfolio into closed-end funds. We also recommend you to do research before buying closed-end funds because they tend to be more expensive than ETFs. Besides, some closed-end funds use leverage which will add risk.

We would like to compare a couple of closed-end funds that track S&P 500, i.e.:

All those three funds are basically buying stocks in S&P 500. They tried to outperform S&P 500 by writing options (covered call). That’s why; if you look at their fact sheets, they pay very high dividend. BlackRock’s Enhanced Capital and Income Fund, for example, pays 12.64% dividend. Yes, it’s double-digit dividend.

Now, let’s compare the performance of those funds to SPY, which is the biggest ETF that replicates S&P 500. As you can see, none of those funds can beat SPY in the long run. From year 2007 until today, here are the return of those funds:

CII: –25.05%
ETB: –22.37%
JCE: –39.67%
SPY: –21.44%

Of course, if you choose the right funds, the overall return including dividend might be higher than SPY.

1stmilliondollar.net » CII

ETFs and Index Funds in Our Portfolio

Comparing Closed-end Funds that Replicates S&P 500′s