ETF Monkey

Here's What It Takes To Afford The Median Home In San Francisco

2018-04-12T14:46:00.000-07:00

Couldn't help but notice this article from Bloomberg the other day featuring the fact that San Francisco's median home price just hit a new high of $1.6 million.

Just to make sure we're clear on terms, median price means that price at which half the transactions are higher and half the transactions are lower. Put a different way, this means that 1 out of every 2 homes currently available for sale in San Francisco is priced at $1.6 million or higher.

I got curious as to what that implies about affordability. What does it take, in the current mortgage rate environment, to purchase such a home?

Here's the "standard" answer, from bankrate.com.

As it turns out, at least from the terms available on this website, one must be able to put down 20% to qualify for the 30-year jumbo loan needed to buy such a home. So, you have to be able to come up with $320,000 just to play. Assuming you can pony up that sort of cash, you get the privilege of tying yourself to a monthly mortgage payment of roughly $6,200 for the next 30 years.

To that, add your property taxes, which will likely run you somewhere between $16,000-20,000 per year, and basic homeowner's insurance for somewhere in the neighborhood (no pun intended) of $2,000 per year. Added together, that's conservatively another $1,500 per month, giving you a total monthly bill of about $7,700.

What does that all imply? Well, at ratios between 33% - 40% of total income, you would need an annual income of somewhere between $231,000 and $277,000 to satisfy your lender.

So there you have it. Want to live in a median-priced San Francisco home? You'll need to bring an annual income in the $250,000 range and about $320,000 in cold, hard cash to the party.

Depressed? No worries, there is some good news. Here's Bloomberg, to close the article.

One silver lining for people out shopping now: The gain in condo prices has moderated as new units come on to the market. The median condo price increased by a relatively modest 4.6 percent from a year earlier, to $1.18 million.

There, that's better.

Goldman Sachs - Increasing U.S. Debt Poses Fiscal Dangers

2018-02-20T11:24:00.001-08:00

Last week, I penned a quick article suggesting that not everyone is getting rich off the stock market. It highlighted the most recent NY Fed report which featured, among other things, that U.S. household debt reached an all-time high in Q4 2017, some 17.9% above its most recent trough in Q2 2013. Further, that the segment with the largest gains was credit cards, with a 3.2% increase. The article went on to feature the sharp rise in the U.S. stock market over that same period and posited that, clearly, the rising tide was not lifting all boats. Finally, it raised the question of what this might portend for U.S. households should interest rates rise moving forward.

Today, Goldman Sachs is out with a piece suggesting the U.S. government faces exactly this same challenge. Here's a quick picture from the linked Bloomberg article.

The Heisenberg, whose economic and geopolitical commentary I find most helpful, has recently featured the concept that current U.S. fiscal policy of piling stimulus in the form of tax cuts and rising deficits on top of an already-strong economy is extremely troubling, leaving us in uncharted territory. With that in mind, a quick quote from the above-linked Bloomberg article.

If current fiscal policies are extended, the Goldman analysts predict that the U.S. net interest expense relative to GDP will exceed the levels seen in the 1980s and early 1990s by 2027. And debt-to-GDP will probably be higher than 100 percent, “putting the U.S. in a worse fiscal position than the experience of the 1940s or 1990s,” they wrote.

Finally, for this quick piece, I will leave you with this little tidbit. Bloomberg also reports that the U.S, Treasury flooded the market with $179 billion of debt today, which has the effect of, according to the article, "helping to push up the rates that borrowers demand."

Increasing debt into a cycle of rising rates. The Mueller investigation heating up. Tread carefully as you invest.

Clearly, Not Everyone Is Getting Rich Off The Stock Market

2018-02-13T14:49:00.000-08:00

Well, the NY Fed was out today with its Quarterly Report on Household Debt and Credit for Q4 2017. Clearly, Americans are in a lot of debt. Take a look.

Just a couple of quick hits from the report. Total U.S. household debt rose $193 billion in the 4th quarter, to a new all-time peak of $13.15 trillion. That's 17.9% above the most recent trough in Q2 2013. Broken down by segment, what do you suppose was the largest gain in percentage terms? Credit cards, with a 3.2% increase. In the picture above, the widening gap represented by the red arrows reflects the fact that non-housing debt is rising at a faster pace than housing debt.

Here's what's troubling about that. Below is a picture of the stock market, as represented by the S&P 500 index, over that same period; from the most recent credit trough in Q2 2013 to the end of 2017.

And thus, the title of this article. Over that period, the S&P 500 index rose by 75%; from roughly 1,600 to 2,800. Apparently, however, the riding tide did not lift all boats. One would think that, burned by the financial crisis of 2008-2009 and riding a wave of profits from the stock market, U.S. households would have been both eager and able to trim those debt levels. Perhaps some did, but clearly not all. And that is troubling, because it means the bulk of those gains have ended up in the hands of a few, while many continue to struggle.

But more than that, we've recently seen the first solid hints of inflation, and rising interest rates. In the main, it was this threat that led to last week's violent action in the markets.

Lots of debt colliding with rising interest rates. It's a challenge the U.S. government will face. But so, apparently, will many U.S. households.

I Couldn't Care Less

2017-10-25T14:46:00.001-07:00

Wanted to take just a minute to share one of my favorite examples of where what I can only attribute to mental laziness corrupts the proper use of the English language.

I hear it, if not once a day, at least several times a week: "I could care less."

"I could care less."

If, indeed, it is possible to care less, whatever it is that you mean to dismiss by use of the phrase is, in fact, not dismissed at all.

No, the phrase is: "I couldn't care less." As in: "You can talk to me all day long about (insert topic here) and it would literally be impossible for me to care any less than I do at this minute."

Added A Little Wells Fargo to The ETF Monkey Core Monthly Dividend Portfolio

2017-09-08T09:27:00.002-07:00

In February, 2017, I wrote an article for Seeking Alpha entitled A Dividend Portfolio Built From The World's Best Dividend ETFs. I later expanded on the work I did in a second article, entitled 20 Top Stocks For A Monthly Dividend Portfolio. In this article, I expanded the original portfolio of 12 stocks to 20, with the specific goal of adding companies that, together, generated at least some level of income for the portfolio each and every month.

At the end of that second article, I revealed that I had "put my money where my mouth is," selling all my holdings in 4 dividend-focused ETFs and replacing them with the 20 stocks listed in the article, as well as two "bonus" stocks. I implemented all of this on July 20, 2017.

I recently added a few additional shares of Wells Fargo (WFC) to the portfolio.

My original position was purchased at $54.93 per share. Since that time, the share price has continued to decline, allowing me to pick up a small additional amount for $49.67 this past Wednesday morning. As it happens, it is trading at $49.68 as I write this, so not much has changed since my purchase.

Wells Fargo is going through a difficult time at the moment due to a recent update which revealed an increase in the number of unauthorized consumer and small-business accounts that were opened. As readers may be aware, Wells has unfortunately been caught up in multiple scandals over the past year, all of which have to some extent damaged the reputation of what had previously been viewed as one of the best-run banks out there. However, for a shareholder such as myself, who plans on holding for the long term, and as part of my core dividend portfolio, I have to look past the current scandals and ask myself whether their long-term future is still sound. In this article, one of my fellow Seeking Alpha authors argues that it is. I might also note that Morningstar rates Wells Fargo 4-stars, despite the status of the various scandals.

What do you think? Add more? Hold? Or sell? All comments are welcomed.

The Power Of A Diversified Portfolio

2017-09-07T11:01:00.001-07:00

Just a quick note for today.

Just over a month ago, I wrote an article for Seeking Alpha in which I suggested 20 Top Stocks For A Monthly Dividend Portfolio along with 2 "bonus" suggestions.

Today, Apple was hit by a Wall Street Journal article confirming rumors of iPhone 8 production delays. General Electric got trashed by a negative JP Morgan note. Speaking of JP Morgan, it too got hit by, from the best I can tell, a continuation of concerns over falling interest rates. And Starbucks appears to have another general case of the blues.

Guess what? All of these stocks are in my portfolio. They are represented by the areas highlighted in red below. I also highlighted AT&T, falling solidly as well, for good measure.

Ah, but go back up and take a look at AbbVie. Up 6.26%! Why? It turns out that they received a favorable decision with respect to patent protection for key drug Humira. You'll see AbbVie as one of the areas featured in green above. I also highlighted some positive moves in Johnson & Johnson, 3M Company, and Microsoft.

Bottom line? On a day when two of my holdings were hit with very specific bad news and another fell fairly sharply based on overall economic conditions, the overall portfolio is only down .16%.

Here's another picture, captured within a minute of the screen capture of my portfolio. It's the status of the market averages, from CNBC.

My point? A well-diversified portfolio will serve you well, even on days when some of the components get hit with a little bad news.

Even so, don't limit yourself to these 20 stocks. In a follow-up article, I suggest 7 ETFs to help you create a truly diversified portfolio.

Happy investing!

Traveling In Italy - Manarola

2017-08-23T17:10:00.000-07:00

One of my favorite destinations in Italy is the Cinque Terre. The phrase "Cinque Terre" literally means "five lands," and refers to 5 small towns (Riomaggiore, Manarola, Corniglia, Vernazza, and Monterosso al Mare) that hug the western coastline of Northern Italy.

If you are a fan of Rick Steves, you likely know that he feels many travelers make the mistake of viewing the Cinque Terre as an afterthought; descending on the region early one morning, blowing through all 5 towns and leaving the same evening. I agree with him that those who do so miss out on so much. I hope to share an overall post on the Cinque Terre at some future point. For this effort, however, I will focus on the town of Manarola.

Manarola is believed to be the oldest of the five villages, with the cornerstone of San Lorenzo church dating back to 1338. Ultimately, the name traces to "magna roea," which means "large wheel," a reference to the mill wheel in the town. My wife and I have visited the Cinque Terre twice, and Manarola has served as our home base on both occasions. I'm here to share just a few of the treasures that we have discovered.

Arriving in Manarola

To reach the Cinque Terre, you will take a high-speed train either to the town of Levanto from the north or La Spezia from the south. From there, you will use the local Cinque Terre train, which travels between all 5 towns, as well as Levanto and La Spezia. Follow these links for some helpful tips and the most recent timetable.

This, in itself, is a wonderful part of the adventure. Here's the train arriving at the station in Manarola, literally cut into the side of the hill with nothing but the clear blue sea beyond.

Where To Stay

My wife and I were so impressed with the place we chose to stay on our first visit to Manarola that we didn't even bother looking elsewhere as we planned our second trip. That place is Arpaiu.

Arpaiu, along with its sister location Vandiris, are run by Debora Cappelli. If you check out reviews on sites such as tripadvisor.com, you will find that, of the two, Arpaiu is the preferred location. Actually, the two are located very close to each other. If Arpaiu is full, Debora will likely offer you a spot in Vandiris.

Arpaiu is a converted home, which now features 4 rooms on 2 levels. The two rooms on the top floor are more or less mirror images of those on the bottom floor, but slightly more advantageous in terms of views and convenience (you don't have to schlep your bags up and down the stairs as you do with the rooms on the bottom floor). You may read of one small complaint with Zin Zin, the smaller of the two rooms on the bottom floor; namely that the stairwell heading up and down from the village runs right past the windows. However, you can simply adjust the shutters if you ever feel uncomfortable.

The pictures you see here are of Ziguela, the larger of the two rooms on the bottom floor.

A couple of caveats up front. First, Arpaiu is not a bed and breakfast. There are some some small snacks, as well as tea, provided in a beautiful lounge upstairs, but you will be on your own for breakfast each morning. I actually don't feel like that's a negative, but we'll discuss that in the next section, "where to eat." Second, as with many places in Manarola, you''re going to need to climb in some fashion to get there. It's either up 128 steps from the main street, or a more circuitous route involving a path.

However, as with many things in life, where there is work there is often reward. In the case or Arpaiu, that reward is location. You see, Arpaiu is right at the front of Manarola. As you look out the windows, there basically isn't much between you and the sea. Want to have a look?

OK, here is that upstairs lounge I was telling you about.

And, if you look out those windows on the left? Wow!

Finally, Debora speaks fluent English, helpful if your Italian is not exactly stellar. On top of that, she is very helpful. Of course, I would like to feel that we contributed to a good relationship by treating her with respect and proving to be good guests, but I will simply add that Debora went out of her way to help us with a couple of favors that greatly enhanced our experience in Cinque Terre.

Where To Eat

Here, I will share 3 favorites, as well as a brief note on one "hot" spot that did nothing for me.

Nessun Dorma Cinque Terre

Let's start with Nessun Dorma Cinque Terre. First, have a look back at the picture from the deck of Arpaiu featured just above. See that awning and those umbrellas about 1/3 of the way up the picture, on the right-hand side? That's Nessun Dorma Cinque Terre. Now, imagine the view were you to be sitting under one of those umbrellas. I promise, it does not disappoint.

Nor, as it turns out, does the food. Prices are reasonable, the food and drinks are great, and the service is pretty good. Be warned, this place gets busy. So get busy yourself, staking out your spot.

Il Porticciolo

Next, let's talk about Il Porticciolo.

Il Porticciolo is one of the culinary landmarks of Manarola. Like so many other things, it has changed over the years due to the relentless path of "progress." On our first visit, it was still run by "Mama," who stood dutifully by the front door beckoning you in. It was a little more casual then, with locals making their way into the back room to eat, for a fixed price, from a buffet-like table of whatever had been prepared that evening. The pesto? I thought it was about the best I had ever tasted.

Ten years later, the sons run it, and tourists occupy that back room as well. It's lost a tiny bit of the "homey" feeling, and you don't get free biscotti and Sciacchetrá (the local dessert wine) at the end of your meal, as we did on our first trip. But, for my money, it's still one of the best dining experiences you will find in Manarola. And that pesto? Still, for my money, the best in town.

Bar Enrica

For my third recommendation, I'd like to feature Bar Enrica. It proved to be my favorite spot in the morning, and the reason I didn't miss the lack of breakfast service at Arpaiu.

Starting from Il Porticciolo, you will find Bar Enrica down towards the waterfront and on the opposite side of the street. In the mornings, you will find the same lady behind the counter whom you would have met 10 years ago. If you only visit once, you may conclude that she doesn't have the most sparkling personality. But if you happen to be staying in the area and return multiple times, you may find she recognizes and warms to you, particularly if you make the effort to speak a few words of Italian. Setting all of this aside for a minute, take a look at the picture. She makes a marvelous Cappucino. And the pastries? Off the charts as well. That's a pear tart and marmalade-filled croissant you're looking at.

And the bill for all this goodness? Have a look. Yep, a grand total of €7.20, or roughly $8.00 depending on the exchange rate when you visit. As you may have figured out, this doubles as an investment blog, and I have previously written about a few of the things that irritate me at Starbucks. In part, it is experiences like this that contribute to this dissatisfaction. None of the pastries in Bar Enrica are frozen and reheated, that's for sure!

Just a couple of final notes on Bar Enrica before I leave you. If you get there first thing in the morning, at 8:00 a.m., you're going to find several locals there, including fishermen just back from the morning catch. It makes for an enjoyable environment. Finally, in the evening, they also have some of the best gelato in town. In total, then, it could end up being the spot where you both begin and end your day in Manarola.

A Disappointment

OK, this is the section that's going to be a bit controversial. The disappointing experience I will share has to do with Trattoria Dal Billy. Now, let me be clear, this is one of the hottest, if not the hottest, spot in town. And I don't think anything I write here will change that, nor do I intend it to. At the same time, I will share an honest view.

Trattoria Dal Billy is at the top of the hill. As such, it commands one of the best views in Manarola. It is very popular, and you will likely want to make a reservation if you don't want to endure a long wait.

The day my wife and I went, the weather happened to be uncharacteristically bad for almost mid-May. The rain poured and it was very blustery. We were seated on the outside deck, and the staff spent the better part of the evening trying to adjust the various screens just to keep the rain off the diners. I will admit, that dampened the ambiance. That part, though, I can allow, because it is somewhat beyond anyone's control.

However, the main server was, in my view, very flippant about the experience. Sort of: "Oh well, there's nothing we can do about it. Remember, you're extremely fortunate to even be sitting here." I guess the bottom line is that I didn't feel they were at all professional. On top of that, though, both my wife and I agreed that we felt the food at Il Porticciolo was better, in particular the pesto. Had we had another evening left on our visit, the choice was clear to us as to where we would have spent it. For us, Trattoria Dal Billy was way overrated.

If you visit, and get a chance to try both, drop your thoughts in the comments section. Whether you agree or disagree, I'd love to get your take.

I Love Pretty Pictures -- Do You?

In conclusion, I will leave you with this. If you are fortunate enough to be in Manarola in the evening and the weather is nice, you will find people lined up along the promontory of the walkway in front of the town, just below Nessun Dorma Cinque Terre. You will find them with their DSLRs and their tripods, lined up to capture an incredible evening photograph of this stunning town.

There are two basic time frames to capture absolutely stunning pictures. The first is just as the sun is going down in the western sky, casting a beautiful yellow-orange glow on the town.

The second is roughly 45 minutes to an hour later (you'll definitely need a tripod and a long exposure for this one).

And that, dear readers, is where I will leave you. For those of you who have been to Manarola, I'd love it if you would take a minute to share a couple of thoughts about your experience. If you haven't, and have a question you would like to ask, I'd be happy to answer to the best of my ability.

Mille grazie!

Added A Little General Electric To The ETF Monkey Core Monthly Dividend Portfolio

2017-08-11T12:03:00.001-07:00

In February, 2017, I wrote an article for Seeking Alpha entitled A Dividend Portfolio Built From The World's Best Dividend ETFs. I later expanded on the work I did in a second article, entitled 20 Top Stocks For A Monthly Dividend Portfolio. In this article, I expanded the original portfolio of 12 stocks to 20, with the specific goal of adding companies that, together, generated at least some level of income for the portfolio each and every month.

At the end of that second article, I revealed that I had "put my money where my mouth is," selling all my holdings in 4 dividend-focused ETFs and replacing them with the 20 stocks listed in the article, as well as two "bonus" stocks. I implemented all of this on July 20, 2017.

This morning, I added a few additional shares of General Electric (GE) to the portfolio.

My original position was purchased at $26.77 per share. Since that time, the share price has continued to decline, allowing me to pick up a small additional amount for $25.28 this morning. This price is basically right at GE's 52-week low.

One small factor that added to my confidence was a report released yesterday featuring the fact that new CEO John Flannery bought $2.7 million in GE stock this week.

Certainly, GE has underperformed the market for some time. In 2015, GE moved aggressively to divest themselves of GE Capital. This subsidiary had comprised a significant piece of GE's overall earnings for many years. At the same time, it had proven extremely volatile. With the move, GE is now refocused on the core industrial business that made them the stuff of legends.

Given the roughly 5.6% price decline since my original purchase, I decided to add a little more to what I hope to be a very long-term holding. Finally, with an annual dividend of $ .96, GE shares will pay me a 3.8% dividend while I wait for capital appreciation from the current share price.

Added A Little Starbucks to The ETF Monkey Core Monthly Dividend Portfolio

2017-08-10T15:47:00.002-07:00

In February, 2017, I wrote an article for Seeking Alpha entitled A Dividend Portfolio Built From The World's Best Dividend ETFs. I later expanded on the work I did in a second article, entitled 20 Top Stocks For A Monthly Dividend Portfolio. In this article, I expanded the original portfolio of 12 stocks to 20, with the specific goal of adding companies that, together, generated at least some level of income for the portfolio each and every month.

At the end of that second article, I revealed that I had "put my money where my mouth is," selling all my holdings in 4 dividend-focused ETFs and replacing them with the 20 stocks listed in the article, as well as two "bonus" stocks. I implemented all of this on July 20, 2017.

This morning, I added additional shares to one of the holdings for the first time. That holding is Starbucks (SBUX).

In brief, my original position was purchased at $58.12 per share. This price represented a decline of almost exactly 10% from the recent high closing price of $64.57 on June 2. Nevertheless, since that time, the share price has continued to decline, allowing me to pick up a small additional amount for $53.50 this morning (the shares continued to fall to their closing price for the day of $53.07).

Amongst other factors, perhaps some of this is due to a report out yesterday from BMO Capital suggesting that Starbucks has deeper issues to be resolved.

In my case, I view Starbucks as one of my core holdings for the next 10+ years. Further, Starbucks has not been a participant in the overwrought market frenzy of 2017. Today's price can be traced all the way back to June, 2015. That led me to think of the famous words of Warren Buffett: "Buy when others are fearful."

What about you? Would you jump in at this price? Or do you expect the rough road to continue? In either case, drop your thoughts below. I would love to hear them.

Synchrony Bank Raises Rates - A Great Day For Savers!

2017-06-01T14:08:00.002-07:00

Great news for online savers! Synchrony Bank, which at 1.05% already sported one of the most competitive interest rates for an online savings account, announced today that, effective 6/1/17, the rate is being raised to 1.15%.

Now, this is nothing earthshaking. It's one-tenth of one percent. However, this is the first time in years that I have seen one of the online banks actually raise their interest rate. A little research appears to reveal that competitor Ally Bank has also raised their rates. Their website appears to show their rate as 1.05% effective 6/1/17, as opposed to the previous long-standing rate of 1.00%. Another major competitor, Capital One, appears to be falling further and further behind, with their rate remaining at a comparatively paltry .75%.

Since the financial meltdown of 2007-2009, one of the groups that has suffered the most are small savers. While the stock market has soared, benefiting those fortunate enough to have both the money to invest as well as the ability to take on the related risk, small savers have been mercilessly punished.

Let's hope this is the first of many good days for these folks.

ACTION ALERT: Added A Little T & VZ This Morning

2017-04-21T12:58:00.000-07:00

Based on the principles I outline in this article, I added a small amount of AT&T and Verizon to the portfolio this morning.

My personal portfolio hit a recent high on March 17. This morning, I ran my personal report and evaluated the respective weightings of T & VZ as of 3/17 vs. this morning. Due to some recent uncertainty in the case of both companies, and a soft quarterly report from Verizon, their prices have softened and their relative weightings had slipped compared to the overall markets. I just thought it was a nice opportunity to pick up some dividends in the 5% range.

Worried About A Market Downturn? Protect Yourself With This ETF

2017-04-20T11:05:00.001-07:00

Based on a recent investment outlook from Vanguard, I wrote an article offering some suggestions on how to position your portfolio for the remainder of 2017. In the article, I made the following observation:

If you have been heavily invested in U.S. stocks, likely your portfolio has performed extremely well of late, particularly since Donald Trump's surprising win in the presidential election. Following an initial overnight drop in futures in the early-morning hours on November 9, the markets rocketed upwards once they opened and, more or less, have not stopped since. At their closing prices on March 31, the Dow was up 12.7%, the S&P 500 up 10.4% and the Nasdaq up a whopping 13.8% from their respective closing prices on November 8, 2016.

However, I went on to note some of the reasons Vanguard offered to suggest that, at best, market returns will be muted for the foreseeable future. Along with that, I shared the view of several market commentators who believe valuations are currently stretched very thinly.

If, like I am, you are concerned that we could be in for a correction and yet do not want to completely divest your stock holdings, I have an ETF for you to consider.

It's the Vanguard Consumer Staples ETF (VDC). Based on the idea that "a picture is worth a thousand words," take a look at the following picture and then I will join you again below.

This 1-year chart features VDC (in blue) overlaid against the Dow Jones Industrial Average (in green) and the S&P 500 Index (in red). Now focus on the area shaded in green. That's the period referred to in that opening quote. Interestingly, when viewed from the perspective of the most recent full year, the red arrow points to an inflection point, ironically, right around the time of Trump's election. Quite clearly, VDC has underperformed since that time. However, there's a flip side to this that may be worthy of consideration.

As you can quickly gather from its name, VDC focuses on the consumer staples sector. As it turns out, this sector is particularly helpful in protecting your portfolio in the event of a market downturn. In brief, Consumer Staples is the term given to products, and the companies which produce these, that are considered essential, such as food, beverages, household items, and tobacco. These are the sorts of items that people need to function each and every day and therefore are generally unable to cut out of their budget even in bad times.

Have a look at some of the high-level characteristics of VDC:

You will note VDC is a fairly concentrated ETF. While it contains a total of 103 stocks, 58.9% of its assets are represented by its 10 largest holdings. Take just a minute to think about the characteristics of those names. In good times and bad, people will be walking into CVS, Wal-Mart, Walgreens and Costco. Once in the stores, they will be purchasing daily essentials manufactured and distributed by Proctor & Gamble, Coca-Cola, PepsiCo and, yes, Philip Morris and Altria.

So there you have it. A measure of protection for your portfolio in the event of a market downturn. Oh yeah, and the most recent 30-day SEC yield for VDC was 2.43%. So you get a little income as well. Not bad, eh?

If you're interested in a little further reading, here's a link to a previous article I wrote covering the consumer staples sector in general, as well as two worthy competitors to VDC.

Until next time, I bid you . . .

Happy investing!

Play Defense With This 7-ETF Portfolio

2017-04-14T16:40:00.000-07:00

The U.S stock market has had a great run. Let me give you just a couple of numbers to ponder. On March 1, 2017, the S&P 500 index closed at an all-time high of 2,395.96. That represented a 254% gain from its close of 676.53 at the low point of the bear market on March 9, 2009. Alternatively, viewed from a more recent perspective, it also represented a 31% gain from its most recent low close of 1,829.08 back on February 11, 2016.

Given all of this, investors may rightly be concerned with finding a good balance between maintaining some exposure to the possibility for gains while at the same time ensuring at least a reasonable level of capital preservation. After all, if the markets experience a sudden, sharp selloff, paying attention to this now may help to allay investors’ fears while also preserving capital to take advantage of subsequent market recoveries.

With all of this in mind, I decided to write a brief post for my friends over at Whotrades.com featuring a 7-ETF portfolio that may be of interest.

3 Best High Dividend Yield ETFs

2017-04-10T14:31:00.002-07:00

Once you have established the core of your portfolio with a world-class total U.S. market or S&P 500 ETF, you may wish to add one or more ETFs that focus on dividend-paying stocks.

Broadly speaking, these fall into two categories: 1). High Dividend Yield and, 2). Dividend Growth. As can quickly be surmised, the priority for the first type is to select stocks that pay a high current dividend yield while the second type focuses on stocks that, while perhaps not currently paying as high a yield, are judged to have excellent prospects of growing that yield over time.

In this article I wrote for Seeking Alpha, I review what I consider to be your 3 best choices for high dividend yield.

Enjoy!

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3 Best Dividend Growth ETFs

2017-04-10T14:28:00.001-07:00

Once you have established the core of your portfolio with a world-class total U.S. market or S&P 500 ETF, you may wish to add one or more ETFs that focus on dividend-paying stocks.

Broadly speaking, these fall into two categories: 1). High Dividend Yield and, 2). Dividend Growth. As can quickly be surmised, the priority for the first type is to select stocks that pay a high current dividend yield while the second type focuses on stocks that, while perhaps not currently paying as high a yield, are judged to have excellent prospects of growing that yield over time.

In this article I wrote for Seeking Alpha, I review what I consider to be your 3 best choices for dividend growth.

Enjoy!

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Authors Note: If you like my work, I would be profoundly grateful if you would take a minute to follow me on Twitter, Facebook, and/or Google+, as well as feature my work to friends, colleagues and/or relatives who may be interested in the subject matter. Growing one's readership base is critical to any author and I am no exception. Your support will enable me to continue my efforts.

3 Best S&P 500 ETFs

2017-04-10T14:18:00.002-07:00

The S&P 500 index holds a special place in stock market lore and history. It is widely regarded as the most accurate gauge of the performance of large-cap American equities. While it focuses on the large-cap sector, it includes a significant portion of the total value of the market. It is perceived as more representative of the market than the Dow Jones Industrial Average because it is made up of 500 companies, compared to the DJIA's 30.

In this article I wrote for Seeking Alpha, I review what I consider to be your 3 best choices in this sector. What makes this article a little special is that one of these is the very first ETF.

Enjoy!

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Authors Note: If you like my work, I would be profoundly grateful if you would take a minute to follow me on Twitter, Facebook, and/or Google+, as well as feature my work to friends, colleagues and/or relatives who may be interested in the subject matter. Growing one's readership base is critical to any author and I am no exception. Your support will enable me to continue my efforts.

3 Best International Emerging Market ETFs

2017-04-07T17:28:00.000-07:00

In a previous 'ETF Monkey Focus' article, I explained why there are good reasons to include exposure to foreign, or international, markets in your portfolio. Two key reasons are potential for growth and diversification. That article featured 3 international total market ETFs, which basically package exposure to all markets outside the U.S in a single ETF.

However, countries outside the U.S. are actually broken down into two categories; developed markets and emerging markets.

In this article I wrote for Seeking Alpha, I review what I consider to be your 3 best choices for investing in emerging markets.

Enjoy!

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Authors Note: If you like my work, I would be profoundly grateful if you would take a minute to follow me on Twitter, Facebook, and/or Google+, as well as feature my work to friends, colleagues and/or relatives who may be interested in the subject matter. Growing one's readership base is critical to any author and I am no exception. Your support will enable me to continue my efforts.

3 Best International Developed Market ETFs

2017-04-07T17:23:00.000-07:00

In a previous 'ETF Monkey Focus' article, I explained why there are good reasons to include exposure to foreign, or international, markets in your portfolio. Two key reasons are potential for growth and diversification. That article featured 3 international total market ETFs, which basically package exposure to all markets outside the U.S in a single ETF.

However, countries outside the U.S. are actually broken down into two categories; developed markets and emerging markets.

In this article I wrote for Seeking Alpha, I review what I consider to be your 3 best choices for investing in developed markets.

Enjoy!

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Authors Note: If you like my work, I would be profoundly grateful if you would take a minute to follow me on Twitter, Facebook, and/or Google+, as well as feature my work to friends, colleagues and/or relatives who may be interested in the subject matter. Growing one's readership base is critical to any author and I am no exception. Your support will enable me to continue my efforts.

3 Best International Total Market ETFs

2017-04-07T17:16:00.002-07:00

As I feature in this educational article from my personal blog, there are good reasons to include exposure to foreign, or international, markets in your portfolio. Two key reasons are potential for growth and diversification.

In this article I wrote for Seeking Alpha, I review what I consider to be your 3 best choices in this sector.

Enjoy!

-----------
Authors Note: If you like my work, I would be profoundly grateful if you would take a minute to follow me on Twitter, Facebook, and/or Google+, as well as feature my work to friends, colleagues and/or relatives who may be interested in the subject matter. Growing one's readership base is critical to any author and I am no exception. Your support will enable me to continue my efforts.

4 Best Total U.S. Bond Market ETFs

2017-04-07T17:13:00.000-07:00

Since the two broadest asset classes are stocks and bonds, a well-diversified portfolio does well to add as one of its core ETFs a first-rate U.S. Total Bond Market ETF.

In this article I wrote for Seeking Alpha, I review what I consider to be your 4 best choices in this sector. I pick 3 winners, and one runner-up.

Enjoy!

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Authors Note: If you like my work, I would be profoundly grateful if you would take a minute to follow me on Twitter, Facebook, and/or Google+, as well as feature my work to friends, colleagues and/or relatives who may be interested in the subject matter. Growing one's readership base is critical to any author and I am no exception. Your support will enable me to continue my efforts.

3 Best Total U.S. Market ETFs

2017-04-07T17:05:00.000-07:00

For most U.S. investors, the first ETF you add to your portfolio should be a top-quality U.S. total stock market ETF. As opposed to the S&P 500, which is comprised solely of large companies (large-cap), the landscape covered by these ETFs also encompasses many smaller companies (mid-cap, small-cap, and even micro-cap). Such companies, while offering a higher level of risk than their larger brethren, also offer greater opportunities for growth.

In this article I wrote for Seeking Alpha, I review what I consider to be your 3 best choices in this sector, with comments on 2 additional ETFs as a bonus.

Enjoy!

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Authors Note: If you like my work, I would be profoundly grateful if you would take a minute to follow me on Twitter, Facebook, and/or Google+, as well as feature my work to friends, colleagues and/or relatives who may be interested in the subject matter. Growing one's readership base is critical to any author and I am no exception. Your support will enable me to continue my efforts.

Position Your Portfolio For The Remainder Of 2017

2017-04-04T18:47:00.002-07:00

If you have been heavily invested in U.S. stocks, likely your portfolio has performed extremely well of late, particularly since Donald Trump's surprising win in the presidential election. Following an initial overnight drop in futures in the early-morning hours on November 9, the markets rocketed upwards once they opened and, more or less, have not stopped since. At their closing prices on March 31, the Dow was up 12.7%, the S&P 500 up 10.4% and the Nasdaq up a whopping 13.8% from their respective closing prices on November 8, 2016.

At the same time, while the Nasdaq managed a small gain in March, both the Dow and S&P 500 actually declined slightly for the month. Several market commentators have discussed the stretched valuations in U.S. stocks. Additionally, a combination of increased utilization of technology, aging populations in the developed world, and the rise of globalization point to a high probability of muted returns for the remainder of the year, and indeed possibly several years into the future.

Positioning Your Portfolio

Given all of this, how should an investor with a moderate risk profile, and for whom capital preservation must be balanced against the possibility of future returns, manage their portfolio?

In a recent note to financial advisors, Vanguard offered some suggestions. While the note did not list exact percentages, I did some extrapolating and came up with the following:

As can be seen, diversification is the key. Based on recent strong U.S. returns, domestic stocks are fairly moderately weighted in the portfolio, with foreign stocks assuming a key role. Risk in these areas is managed by an allocation to both domestic and foreign bonds, with a small allocation to TIPS for a little inflation protection, in case growth comes in a little higher than the expectation for 'muted returns.'

Suggested ETFs

Of course, one easy way to implement an overall portfolio strategy is to use ETFs to do so. These tools allow you to get very precise with your allocations, ensuring diversification while keeping costs low.

Domestic Stocks - A simple way to get exposure to the overall U.S. stock market is to select a quality total-market ETF. My favorites are the Vanguard Total Stock Market ETF (VTI), the iShares Core S&P Total U.S. Stock Market ETF (ITOT), and the Schwab U.S. Broad Market ETF (SCHB). All of these ETFs have expense ratios of .05% or less, assets under management (AUM) in the multiple billions of dollars, and even offer commission-free trading depending on your choice of brokerage. Please see this detailed review and comparison if you are interested in diving in a little deeper.

If you wish to focus on large-cap stocks, while still getting solid exposure to the U.S. market, you might also consider a top-quality S&P 500 ETF.

Foreign Stocks - To venture abroad, your simplest option is to select a quality international total-market ETF. My favorites are the iShares Core MSCI Total International Stock ETF (IXUS), Vanguard FTSE All-World ex-US ETF (VEU), and the Vanguard Total International Stock ETF (VXUS). Again, I offer a nice review and comparison for those who wish to dig a little deeper.

Bonds - An easy way to get broad overall coverage of the U.S. and foreign bond markets is via the Vanguard Total Bond Market ETF (BND) and the Vanguard Total International Bond ETF (BNDX). I cover BND here along with a couple of worthy alternates. I have not yet had a chance to do a detailed review of BNDX, but it offers exposure to several countries, with the greatest exposure being to Japan, France, Germany, Italy and the United Kingdom. A majority of the fund’s investments are in sovereign bonds with AA rating or better.

TIPS - My recommendation here is the iShares TIPS Bond ETF (TIP). With $23 billion in AUM, it offers a solid basket of TIPS along with great tradeability.

Summary and Conclusion

With the U.S. market at or near all-time highs, now is a good time to give a little thought to whether your portfolio is as well diversified as it should be. Given the current level of political and other uncertainty in the world, unless you feel you have a crystal ball as to how this will all play out, it pays to ensure you have built a portfolio that will deal well with a variety of potential future outcomes.

What are your thoughts? Please feel free to start the discussion in the comments section below.

On Warren Buffett, ETFs, And The Democratization Of Investing

2017-03-16T17:27:00.000-07:00

I’m an average guy. When I travel to New York City, I stay at the Affinia Shelburne in Murray Hill. I usually pick up breakfast at the bagel shop just down the street, or the Pret A Manger at 41^st and Lex. Maybe I’ll grab a little lunch at the original Shake Shack in Madison Square Park. And the last time I visited, I had a great $12 bowl of Tokyo Chicken at Momosan Ramen & Sake, Chef Morimoto’s cool ramen bar at 342 Lexington.

I’ve never been able to stay at the Plaza Hotel, nor dine at Per Se or Masa. As I say, I’m an average guy. Not poor, by any means. But not wealthy enough to engage in pursuits where money is no object.

Perhaps that is why a particular point that Warren Buffett made in his 2016 Shareholder Letter, and the way he explained it, really caught my attention. You see, for about two years now, I have been writing on the topic of ETFs. As I have done so, I have focused on the issue of cost; of keeping your expenses low and putting as much as possible of the returns generated by the market in your pocket.

More than once, I have posited that the beauty of ETFs is that they allow even the “common man”—the butcher, the baker, the candlestick maker—to benefit from being able to participate in the financial markets.

But I had not thought about it from the specific vantage point that such a person might just possibly be able to do as well as the wealthy. Until I read Buffett’s letter. Let’s see how he put it:

The wealthy are accustomed to feeling that it is their lot in life to get the best food, schooling, entertainment, housing, plastic surgery, sports ticket, you name it. Their money, they feel, should buy them something superior compared to what the masses receive.

In many aspects of life, indeed, wealth does command top-grade products or services. For that reason, the financial “elites” – wealthy individuals, pension funds, college endowments and the like – have great trouble meekly signing up for a financial product or service that is available as well to people investing only a few thousand dollars.

Ah, now there is a concept I can relate to. I understand full well that there are individuals who, on a regular basis, have access to things that are beyond my capabilities. But along with that sometimes comes a sense of entitlement. Buffett puts it so well; a “feeling that it is their lot in life to get the best . . . something superior compared to what the masses receive.”

Why, though, does Buffett bring this up? Is he engaged in an assault on the wealthy? Any such assault would of necessity be an assault on himself, as he is one of the wealthiest men in America. No, his argument is with the huge fees the wealthy often pay to high-priced financial advisors. Buffett argues that, because of that sense of entitlement, that feeling that it is their lot in life to get the best, it must logically follow that huge fees paid to financial advisors confer on them an advantage. After all, the “masses” can’t achieve results that are just as good, can they?

Buffett goes on to argue that they can, and often do. In the title of this article, I refer to this concept as “the democratization of investing.” I believe that ETFs play a huge part in this, and it is this very thing that inspires my writing.

As just one brief example, consider for a moment the millennial generation. The Pew Research Center defines millennials as those between the ages of 18-34 in 2015. While this generation has many advantages compared to previous generations, they haven’t exactly had things easy from a financial standpoint. According to this article from Forbes:

Not only did this generation come of age during a crushing financial crisis, they are also weighed down by more student loan debt than any other generation has ever had.

Given all of this, according to that same Forbes article, many millennials have not expressed much interest in investing; some 80% are not invested in the stock market.

So, one of my projects late last year was to encourage millennials to make saving and investing their New Year’s Resolution for 2017. In that article, I suggested not only 7 world-class ETFs to help them get off to a great start, but also a brokerage that would allow them to trade those ETFs free of trading commissions. How much did that advice cost? Just the time it took to read the article. I then followed that up with a second article in which I actually set up the portfolio. It is my goal to track the portfolio and provide regular updates as to how it performs, using the S&P 500 index as a benchmark.

Here’s how Buffett wraps up this segment of his discussion:

Human behavior won’t change. Wealthy individuals, pension funds, endowments and the like will continue to feel they deserve something “extra” in investment advice. Those advisors who cleverly play to this expectation will get very rich. This year the magic potion may be hedge funds, next year something else. The likely result from this parade of promises is predicted in an adage: “When a person with money meets a person with experience, the one with experience ends up with the money and the one with money leaves with experience.”

I’m not sure whether I will ever be able to stay at The Plaza, or eat at Masa. But the next time I chow down on a burger and chocolate shake at Shake Shack, or that Tokyo Chicken bowl at Momosan, I will likely remember Buffett’s comments, and find myself extremely grateful for ETFs and the role they play in the democratization of investing.

Let's Be Careful Out There

2017-02-22T14:09:00.002-08:00

You may remember that classic line from the series Hill Street Blues. Each morning, as he concluded his morning briefing, Sargeant Phil Esterhaus reminded his officers of the importance of staying alert and being careful.

This may be very timely advice for investors as well. I got to thinking about this as the market closed today. Why? Because, as of today's close my personal portfolio is at an all-time high. That in and of itself is not unusual. U.S. market averages are also at all-time highs. In fact, the Dow just posted its 9th straight record close.

What is a little unusual is that I have now achieved new all-time highs for 10 straight days. And what THAT means is that there is an unusually low amount of volatility in the market.

Think about it for a minute. Would you agree that there is currently what can only be described as a higher-than-normal level of volatility in the world? Might you even go so far to describe it as fear and uncertainty? Normally, markets hate uncertainty.

What might that mean for you, and your portfolio? I could offer my thoughts. Instead, take a look at these recent comments from Art Cashin and Goldman Sachs.

Let's be careful out there

ETF Monkey And The Fiduciary Rule

2017-02-03T16:38:00.002-08:00

Earlier today, President Trump signed an executive order delaying the implementation of the fiduciary rule, an Obama-era Labor Department rule that requires brokers to act in a client’s best interest, rather than seek the highest profits for themselves, when providing retirement advice.

While the merits of this rule are a subject of fierce debate, anyone interested in saving and investing towards their retirement has a vested interest in this topic.

What does all of this have to do with me? For a little over a year-and-a-half, I have been writing using the pseudonym ETF Monkey. In this blog post I wrote for WhoTrades.com, I offer a few thoughts regarding my own work, and what I believe to be the benefits I offer readers whichever way things shake out with respect to future implementation of the fiduciary rule.

I hope you enjoy it.