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2010: The Year Of The “Barbell” ETF Portfolio

10 September 2010 at 3:47 pm by Gary Gordon     Bookmark and Share    Follow EtfExpert on Twitter

Throughout the year, I have pursued higher-yielding income. Energy partnerships, preferred shares, high yield bonds, emerging market bonds — it hasn’t mattered. The¬†corresponding ETFs¬†experienced¬†capital appreciation; meanwhile, the 5%-8%¬†annual yield presented extraordinary value up and above comparable treasuries.

With that said, how can I completely knock U.S. treasury bonds? Or for that matter, how can anyone slam the safest of safe harbors. In fact, the only victors from the 2008 disaster ( e.g., treasury bonds, the U.S. dollar, the Japanese yen, gold, etc.) also managed super-sized gains during the 8 and 1/2 months of 2010.

At the same time, single country emerging market ETFs… some of which couldn’t be any further out on the risk spectrum (at least in theory)… have also been remarkable superstars. That’s right! Risky emerging markets have been winners… right alongside¬†“scared-silly”¬†investments.

It occurred to me that an investor¬†combining high fear (lower risk) assets with low fear (high risk) assets has been making out like a bandit. Indeed, an investor could have ignored¬†he middle of the risk spectrum… from high yielders to U.S. stocks to developed world stocks… and still experienced remarkable returns. The strategy?¬†Concentrate on the “barbell” ends of the risk continuum.

Barbell ETF Portfolio YTD 2010 (Hypothetical 1/1-9/10)  
            Approx %
iShares U.S. Treasuries 1-3 Years (SHY)     2.1%
Vanguard Extended Duration U.S Treasuries (EDV)   23.3%
CurrencyTrust Japanense Yen (FXY)     6.6%
PowerShares Dollar Bullish (UUP)     3.9%
SPDR Gold Trust (GLD)       13.4%
WisdomTree Emerging Market Small Cap (DGS)   12.6%
Claymore Frontier Markets (FRN)     20.9%
iShares Emerging Market Indonesia (IDX)     31.0%
iShares Emerging Market Turkey (TUR)     17.2%
iShares Emerging Market Peru (EPU)     20.0%
Barbell Portfolio YTD         15.1%
S&P 500           -0.5%


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Disclosure Statement: ETF Expert¬†is a web log (‚ÄĚblog‚ÄĚ) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.

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