ETFs Are Changing The Game (2/13)


ETFs Are Changing The Game

By David Kreinces, ETF PM (2/20/13)

Computerization is constantly changing the game in many industries. On Wall Street, the rate of change is even faster given the extraordinary sums at stake. Still, many people update their smartphones more often than their investment portfolios.

In recent decades, computerization has helped investors the most through index funds and exchange-traded funds (ETFs). Warren Buffett and David Swensen have both been recommending index funds for years, and Vanguard has surpassed Fidelity in assets under management. In fact, the world’s largest asset managers are the leading ETF and index fund providers.

Investable Benchmarks

Since investment results are mainly determined by “asset allocation,” investors need to use index funds strategically. In the book, “Unconventional Success,” David Swensen explains his prescription for a core growth portfolio using six top ETFs from Vanguard and iShares.

Swensen is the ideal architect for a core portfolio. He has a leading institutional track record managing Yale’s multi-billion dollar endowment fund and his book bashes Wall Street for overcharging investors on inferior solutions. And if that is not enough, a large portion of Wall Street is openly following his lead.

At ETF Portfolio Management (ETF PM), we track Swensen’s prescription through the “eMAC,” an efficient multi-asset class portfolio. Over the past decade, the eMAC compounded by 9.9% per year while the S&P 500 delivered 7.0% annually. This equates to a total return of 157% versus 97% for the S&P.

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