Mad Money Machine

Hosted by Paul Boyer

Prediction #8 Realized: One-Stop-Shop ETF

I made ten (really eleven) predictions on show MMM-092: Predicting the Future for 2008. Prediction #8 was:

8. A one-stop-shop ETF portfolio fund will appear that gives complete exposure to risk, reward, and diversification all for a low fee. It will include all of the SMILER components as well as some bonds, commodities, and even private equity and possibly even some selected shorts (A short of a bear fund, perhaps??)

MMM-092That prediction came true today as I learned from IndexUniverse.com that PowerShares announced three “ETFs of ETFs“, their so-called “Autonomic” portfolios. All of the SMILER components (Small, Micro, International, Large, Emerging Market, and REIT) are in these plus some bonds and commodities. Even currencies, gold and oil funds are in these. These are the laziest possible portfolios; buy one ETF and you’re done! (Hmmm, maybe I’m not really recommending that. We’ll see…)

The funds are named “PowerShares Autonomic [style] NFA Global Asset Portfolio” where [style] is either Balanced (PCA), Balanced Growth (PAO) or Growth (PTO).

The total expense ratios for each of these funds include the expenses of each of the component ETFs plus another layer of management fees and are 0.82% for PAO, 0.75% for PCA, and 0.86% for PTO. Yeah, you might be able to do it cheaper if you bought each of the ETFs yourself. Then again, maybe not with all the trading costs.

The table below shows the percentage of each of the ETFs that are included in each of the new ETFs.

Name Ticker PTO PCA PAO
PowerShares Dynamic Developed Intl Optys PFA 22.18 7.19 14.69
PowerShares Dynamic Large Cap Portfolio PJF 13.03 4.45 8.92
PowerShares Dynamic Europe Portfolio PEH 7.78 14.84 13.67
PowerShares Dynamic Asia Pacific Optys PUA 4.62 4.61 4.62
Vanguard Emerging Markets ETF VWO 4.55 3.89 4.05
ISHARES MSCI E.M.I.F EEM 4.51   1.81
PowerShares Dynamic Large Cap Value  PWV 4.47 4.18 4.31
PowerShares Dynamic Mid Cap Growth  PWJ 4.38 2.94 3.74
PowerShares Dynamic Large Cap Growth  PWB 4 4.16 4.03
PowerShares Dynamic Small Cap Value  PWY 3.51 3.02 3.45
Vanguard Europe Pacific ETF VEA 3.03    
PowerShares Dynamic Small Cap Growth  PWT 2.86 1.46 1.94
PowerShares Dynamic Mid Cap Value  PWP 2.54 2.21 2.57
Vanguard REIT ETF VNQ 2.39 3.11 3.12
DJ Wilshire REIT ETF RWR 2.36 3.08 3.08
Vanguard European ETF VGK 2.02    
PowerShares Emerging Markets Sovereign Debt  PCY 1.75 2.78 2.46
ISHARES GS Invest Grade Corp Bond LQD 1.52 8.05 4.4
PowerShares 1-30 Laddered Treasury Portfolio PLW 1.35 4.51 3.98
SPDR Lehman International Treasury Bond  BWX 1.29 5.19 4.01
PowerShares Zacks Micro Cap Portfolio PZI 1.25 0.8 0.97
iShares Lehman MBS Fixed-Rate Bond Fund MBB 0.92 6.5 2.69
ISHARES LEHMAN TIPS TIP 0.82 3.57 2.51
PowerShares DB Gold Fund DGL 0.54 0.83 0.75
POWERSHARES HYCB PHB 0.54 1.77 1.28
PowerShares DB G10 Currency Harvest Fund DBV 0.53 1.28 1.04
PowerShares Dynamic Mid Cap Portfolio PJG 0.5    
PowerShares DB Oil Fund DBO 0.48 0.64 0.57
ISHARES LEHMAN 20 YR TLT 0.25 1.33 0.8
ISHARES LEHMAN 1-3YR SHY 0.05 1.21  
ISHARESLEHMAN 7-10YR IEF   2.38 0.47

I intend to track these funds to see how well they compare against our Lazy Portfolios. I may even try to backtest a portfolio of the individual ETFs to see how well it would have done in the past, including the average annualized returns and Sharpe Ratio. The problem will be that some of the ETFs themselves aren’t that old.

I’ll be talking about this on show 112 and letting you know more as I know more. This is fun. By my count, that is 4 down, 6 to go. (Predictions #3, 4, 5, and 8.) I still stand by the rest. And we’ll see if Apple announces a tablet PC on June 9th for prediction #2.

And since I’m here, have you noticed that Jim Cramer has been talking more about “portfolios” recently? His “Kevlar” and “Stability” portfolios come to mind. This makes prediction #1 even more likely. #7 is a slam dunk. And hey, for #9 there are more international stars in MLS this season too. Go Beckham!

Bookmark and Share

Tue, May 20 2008 » Predictions

Login