How's The (All) Weather Portfolio?

The other portfolio is posted at ETFshark.com but apparently it was devised by Tony Robbins. It owns SPDR S&P 500 ETF (SPY) 30%, PowerShares DB Commodity Tracking ETF (DBC) 7.5%, iShares Barclays 7-10 Year Treasury Bond ETF (IEF) 15%, iShares Barclays 20+ Year Treasury Bond ETF (TLT) 40%, SPDR Gold Shares ETF (GLD) 7.5%. Again, it appears to be reminiscent of the Permanent Portfolio and it appears to take interest rate risk. Return info is provided but with a little less detail than at the Toroso site, it shows an annualized return since its inception in November 2014 of 8.56%. Unlike Toroso All Weather Plus, the portfolio from Robbins is static other than rebalancing. The Toroso portfolio is actively managed.

If either of these pique your interest, I would tell you that 40% in TLT is a nightmare waiting to happen. From August 24 to October 8th, TLT dropped from 121 to 112 on a 35 basis point move in the ten year treasury. Maybe interest rates will never normalize but if they do, TLT will fall precipitously.

I don't think you can build something like this on your own with the expectation of setting and forgetting. Equities are the asset class that does the best most of the time. Any investor relying on equity market appreciation for their financial plan to work probably needs more than 25% or 30% allocated to equities. Also, there are times where someone actively engaged might want to reduce equity exposure which obviously is the exact opposite of set and forget.

In choosing an equity fund for some sort of all weather portfolio I would say that sticking with broad funds makes more sense. While a homemade all weather portfolio probably won't be set and forget, if you build it with a bunch of thematic funds for your equity exposure you are essentially guaranteeing you will have work to do. Whether you want that or not depends on the amount of time you want to spend. Additionally, delving into thematic funds runs the risk of being wrong. There is nothing that says some theme can't go down while the broad market is going up. Again, that risk doesn't have to be a negative but it is important to understand.

For broad based equity funds, there are many to choose from that are cheap and depending on your brokerage firm, might be commission free. One fund that I am intrigued with in this context is the Horizons NASDAQ 100 Covered Call ETF (QYLD). As the name implies it sells call options and the fund has a very high payout which shows on ETF.com currently at 11.2%. When something has that high of a yield I usually talk about how risky the fund is, that kind of doesn't apply because in no way shape or form is QYLD anything but an equity proxy. The last few weeks give a good microcosm of what to expect during downdrafts.

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Disclaimer: The information, statements, views, and opinions included in this publication are based on sources (both internal and external sources) considered to be reliable, but no ...

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