Many investors are searching for the best ETF portfolio and two of the world’s leading investors, Warren Buffett and David Swensen, have both reported their recommendations. Below, see their performance versus the S&P 500, long-term Treasury bonds, and ETF PM’s investable benchmarks:
Past performance can never guarantee future results. Worst Year data since 2000.
Swensen & Buffett Portfolios
Over the past 9.9 years, the Swensen & Buffett ETF portfolios delivered 6% and 8% annualized, or 79% and 113% in total return. These unleveraged growth portfolios significantly underperformed the leveraged investable benchmarks in total return and risk.
S&P 500 and Treasuries
Over the past 9.9 years, both long-term Treasuries bonds (TLT) and the S&P 500 (SPY) delivered annualized returns of 6% and 8% as well. However, neither Buffett nor Swensen recommend an allocation to long-term Treasuries even though the asset class has historically delivered critical portfolio protection.
For example, during the stock market crash from 2000 to 2002, TLT delivered a 47% gain while SPY fell 38%. TLT also delivered shocking relative outperformance in 2008, 2011, and 2014 with gains of 34%, 34%, and 27% respectively.
Year-to-date as of November 30, the S&P 500 gained 20%, and long-term Treasury bonds (TLT) were up 7%.
Over the past 9.9 years, the Income & Growth (IG) investable benchmark returned 7% annualized, or 100% in total return. We estimate that the Income and Growth 2x/3x portfolios delivered annualized returns of 15% and 22%, respectively, or 291% and 615% in total return.
In addition, all three of these income and growth portfolios fell by less than 5% in the market crash of 2008, while IG 3x gained 2% that year.
Income and Tech 3x
Given the strong growth in technology and automation, ETF PM recently launched Income and Tech 3x (IT 3x) for aggressive growth investors. Over the past 9.9 years, we estimate that IT 3x returned 32% annualized, or 1,491% in total return.
However, IT 3x and the other leveraged investable benchmark portfolios may be extremely volatile at times. These portfolios are available through a range of passive and active asset allocations, and we encourage investors to engage leverage slowly, and/or to employ ETF PM’s overriding risk controls.
ETF PM’s efficient asset allocations appear even more attractive when you consider their passive investment process and historical return estimates versus leading hedge funds. See the “risk parity” All Weather portfolio, run by Bridgewater, the world’s largest hedge fund manager.
In 2013, Bridgewater’s All Weather portfolio returned -4%, while IG 3x gained 29%. Many investors are now employing leverage in risk parity including AQR, and BlackRock, the world’s largest asset manager.
Over the past 9.9 years, the leveraged investable benchmark portfolios significantly outperformed the portfolios recommended by Swensen and Buffett. Strategic diversification can be a free lunch and leveraged diversification can be a free retirement nest egg.
Still, investors must be mindful of the risks, regulatory issues, and misunderstandings concerning leveraged ETFs. As per Greek philosopher Heraclitus, “Life is Flux” meaning “all things change.” Given this truth, and the wide range of economic environments, the best ETF portfolio is certain to change over time.
See prior versions of this article: 6/17, 10/16, 6/16, 9/14 6/14, 3/14, 12/13, 9/13, 9/12, 5/12, 4/10, 4/09
Contact ETF PM to learn more.