Selection of Balanced ETF Portfolio

In my post on Febuary 19 titled ETF Trading Strategies, I listed out what I thought could be a good balance of 10 ETF's. The next step is to select the actual ETF's for a portfolio. I have done this using MorningStar's ETF Screener and Yahoo Finance.

In stating the obvious, the returns for the ETFs I looked at were really dismal. As a result my selection is based more on expenses and market capitalization. I typically went with the lower expense and the larger market cap. Here is what I have come up with:

SPDRs (SPY, 20%)
Vanguard Total Stock Market ETF (VTI, 10%)
iShares Russell 2000 Index (IWM, 15%)
Vanguard SF REIT ETF (VNQ, 10%)
Vanguard European Stock ETF (VGK, 10%)
Vanguard Pacific ETF (VPL, 10%)
Vanguard Emerging Markets ETF (VWO, 5%)
iShares Barclays Aggregate Bond (AGG, 10%)
iShares Barclays 1-3 Yr Credit Bond (CSJ, 5%)
iShares Barclays TIP (TIP, 5%)

In parenthesis are the ETF symbol and the percentage of the portfolio each ETF will constitute. If you recall, this hypothetical portfolio came out of the idea that Buy and Hold investing may be dead.

So my plan is to create two fictional investors (A & B) and compare the ETF investing strategy of Buy and Hold with a more active investment style. Here are a few assumptions:

Each investor has $10,000 to invest now.

Investor A believes in Buy and Hold. Investor B does not.

Investor A has seen prices decline significantly and is ready to jump into the market now. Investor B's strategy indicates that he should wait. (I'll describe Investor B's ETF investment strategy in a later post).

What I will do next is create a portfolio in Yahoo Finance or something similar so we can track the results. Ideally I'll be able to account for dividends so performance will be fairly accurate. I'll use the ETF prices as of the close of 2/27/2009.

I'll mention again that this is an educational experiment. And oh by the way, I don't own any of the ETFs listed above. I'm also planning a newsletter where I'll send out the comparisons of these strategies. You can sign up for the newsletter here. I promise no spamming or sharing your email address.