Model Portfolios That Have Worked in 2016

Here are two model portfolios that have worked in 2016 compared to the S&P 500 (SPY).  I like to use the top 10 holdings of ETFs to use their stock portfolio ideas, mimic the ETF without paying the expenses of the ETF.   A great example would be the one below.  I have taken screen shots of the top 10 holdings of 2 ETFs (MTUM) iShares Edge USA Momentum Factor ETF and (OUSA) O’Shares U.S. Quality Dividend ETF compared to the S&P 500 (SPY). Owning these 20 stocks would give you a good balance between classic dividend stocks and growth/momentum stocks.

The first screen shot is from the iShares Edge USA Momentum Factor ETF.  The investment seeks to track the investment results of the MSCI USA Momentum Index. The index consists of stocks exhibiting relatively higher momentum characteristics than the traditional market capitalization-weighted parent index, the MSCI USA Index, which includes U.S. large- and mid-capitalization stocks. The ETF is up 3.17% YTD but as you can see 6 out of the top 10 holdings are up double digits on the year so it pays better to own the top ten holdings of the ETF rather than the ETF itself not to mention a higher dividend payout than the ETF itself.

Model Portfolios

The second screen shot is the O’Shares U.S. Quality Dividend ETF.  The investment seeks to track the performance of its target index, the FTSE US Qual / Vol / Yield Factor 5% Capped Index. The U.S. target index is designed to measure the performance of publicly-listed large-capitalization and mid-capitalization dividend-paying issuers in the United States that meet certain market capitalization, liquidity, high quality, low volatility and dividend yield thresholds, as determined by FTSE-Russell.  At least 5 of the top 10 holdings are dividend aristocrats, stocks that have historically raised their dividends every year.  In fact, 8 out of the 10 holdings I would use as foundation stocks, buy and hold forever in a retirement account and buy in dips (choosing one oil and one telecom stock from the 4 provided).  The ETF up 7.86% YTD but again 5 out of the 10 holdings are up double digits so it pays to own the top 10 holdings rather than the ETF plus a higher dividend payout than the ETF itself.

Model Portfolios

The final screen shot is the S&P 500 (SPY) which tracks the S&P 500 index. The ETF is up 4.55% YTD but yet again 5 out of the 10 holdings are up double digits so it pays to own the holdings instead of the ETF plus the higher dividend payout rather than the ETF. Many of the stocks in all 3 ETFs overlap, so there would be less than 30 stocks if you wanted to mimic all 3 ETFs.

Model Portfolios

ETF breakdown and explanations provided by Charles Schwab.

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