Good Professor Siegel's WisdomTree ETF Lazy Portfolio Is Not That Good
06/08/2011 0 comments
Paul Farrell at MarketWatch.com first proposed this portfolio in 2007. This portfolio uses all WisdomTree's fundamental weighted ETFs. Jeremy Siegel, a Yale Professor, is instrumental in constructing these ETFs. The following is the list of funds:
- 20% in DEFA Index (DWM)
- 15% in Total Dividend Index (DTD)
- 15% in Earnings Index (EXT)
- 10% in High-Yield Equity Index (DHS)
- 10% in DEFA High-Yield Equity Index (DTH)
- 10% in International Energy Sector (DKA)
- 10% in International Consumer Non-Cyclical Index (DPN)
- 10% in Low P/E Index (EZY)
You can also find more information on Kirk's Report here.
These funds cover 2 major assets: US Equity, Foreign Equity.
The follow table compares the performance of the original portfolio (it is rebalanced annually) with those of strategic and tactical asset allocation portfolios with risk profile 0 (i.e. all equities). It is clear that the tactical asset allocation portfolio outperformed both the original and the strategic asset allocation.
| Portfolio Name | Strategy | 1Yr AR | 3Yr AR | 5Yr AR | |
|---|---|---|---|---|---|
| Strategic Asset Allocation | 28% | -2% | 2% | ||
| Tactical Asset Allocation | 4% | 2% | 5% | ||
| STATIC | 13% | -2% |
What is more interesting is that the original portfolio underperformed S&P 500 (SPY) (VFINX). The following table shows the comparison:
Annualized Return
Name |
Last 1 Year |
Last 3 Years |
Last 5 Years |
| Professor Siegel`s Lazy WisdomTree ETFs Original Portfolio | 13% | -1% | |
| VFINX (Vanguard (S&P 500) Index) | 20% | 0% | 2% |
| VBINX (Vanguard Balance (60% stocks/40% bonds) | 15% | 4% | 5% |
The first week of June has shown the continuously weakened stock markets reacted to a stream of bad economic news: the 9.1% unemployment rate, the disappointing ISM manufacturing survey and the double dip housing prices. Major risk asset prices were divergent, with U.S. stocks showing the major weakness. Fixed income markets continued to be strong.
- Among risk assets, commodities (DBC) (GLD) and international and U.S. REITs (RWX) (IYR) are still ranked at the top.
- Emerging market and developed market stocks (VWO) (EFA) actually edged out some gain.
- International treasury bond (BWX) is now ranked higher than both international and U.S. stocks now.
Fundamentally, we believe major problems that caused the financial crisis have not been fixed. We are in a long period of re-adjustment. For a long term or retirement investor, it is thus important to adjust portfolios accordingly.
To summarize, the WisdomTree ETFs portfolio proposed by Professor Siegel is not performing well. Investors should keep watchful eyes on some of those so called lazy portfolios and do their own due diligence.
Exchange Tickers: (DWM), (DTD), (EXT), (DHS), (DTH), (DKA), (DPN), (EZY), (VTI), (VEU), (BND)
Symbols: DWM, DTD, EXT, DHS, DTH, DKA, DPN, EZY, VTI, VEU, BND, SPY, EFA
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