Changes Ahead

Last week, I discussed the challenge of holding a position that remains attractive but has rallied substantially and faces a short-term risk, explaining why I had reduced a great equity ETF. This week, I exited it.

A Look at the Market

The State Street SPDR S&P 500 ETF (SPY) fell Monday, gapped lower Tuesday, and pulled back during the rest of the week, ending down for the week. It has increased in price by 6.9% and has returned 7.5% with dividends. Bonds remain under pressure, with iShares Core US Aggregate Bond ETF (AGG) now returning just 1.1% with dividends included, which is below the return on cash.

In this section, I generally discuss a big topic. At the end of May, which was right at month-end, I shared my monthly update to my 85-ETF watchlist. I put a lot of work into that process each month, and I will be sharing it on Wednesday morning as June comes to an end.

Today, I will tell you what changes I am making here. First, I am going to share real-time alerts on model portfolio adjustments with anyone that wants them. I had a request from someone to do so, and that person happened to be a former 420 Investor member. I thought it was a good idea, and I began doing so. He is the first on that list, and I am happy to add your name to the list.

Speaking of alerts, I will start sending this weekly newsletter out to anyone that wants it. I am starting with a small group of people but can eliminate any of them who doesn't want to receive the weekly newsletter alert. As part of this, I have created a new "tag" for weekly newsletters and have added those published here since mid-May.

The next thing is that I have changed the table that I share in the next section. When I do the monthly newsletter on Wednesday, it will include an even more updated table.

Finally, I am going to add some ETFs to my watchlist after the month ends. VettaFi just purchased RAFI Indices from Research Affiliates, a firm that was started by Rob Arnott in 2002. VettaFi is owned by TMX Group, which also owns the Toronto Stock Exchange and other exchanges as well as Newsfile. I have liked the idea of what Research Affiliates is doing with its investments, and I have a lot of confidence that their indices will hold up better than the S&P 500 and other market-cap weighted indices if the market goes down. I already include one RAFI index name on my list, and I am looking at adding one or two other ones. RAFI has over 90 indices.

ETF Model Portfolio Update

This ETF model portfolio, which is measured against 60% SPY and 40% AGG, is up relative to its benchmark. This week, I did several trades, which were published on here instead of on my Seeking Alpha blog. For those who would like real-time alerts (free of charge for now), just subscribe to the blog.

I also posted two articles, one at Seeking Alpha and one at TalkMarkets, about ETFs:

• Three Inflation Protection Strategies Better Than Gold

• Swap Out Of PEY Into NOBL

I also wrote about a stock, Bassett Furniture (BSET) at Seeking Alpha:

• Bassett Furniture: Not A Dog But A Cheap Stock

Going into the week, my equity exposure totaled 29.0%, spread out across four ETFs. Here is what I did this week:

• Monday: I reduced iShares Bitcoin Trust ETF (IBIT) and added to PIMCO 15+ Year US TIPS Index ETF (LTPZ) and exited State Street Utilities Select Sector SPDR ETF (XLU) in favor of boosting ProShares S&P 500 Dividend Aristocrats ETF (NOBL).

• Tuesday: I reduced Vanguard Short-Term Treasury Index Fund ETF (VGSH) to add to IBIT at a lower price than where I had trimmed it.

• Wednesday: I trimmed LTPZ and reduced VGSH again to buy more Vanguard Short-Term Inflation-Protected Securities Index ETF (VTIP) and exited ProShares R2000 Dividend Growers ETF (SMDV) to add a new position again in Invesco S&P 500 Equal Weight ETF (RSP).

• Thursday: I reduced LTZP and added to IBIT, a repeat of the way the model portfolio began the week.

Here is the current model portfolio, which now has 28.6% equity exposure in three ETFs and fixed income exposure in three ETFs that totals 56.1%:

I have been wrong this year, at least so far, as stocks keep rallying. The rally has been until Friday three weeks ago, when they had their worst day of the year. Since then, the S&P 500 has not made a new high, though it sure tried. Small-caps did make a new high this week. Despite being underweight stocks all year, my return relative to the 60/40 index is higher by about 4% in less than six months. In fact, while the S&P 500 fell this week, and the Aggregate Bond Index advanced only slightly, this model portfolio advanced during the week.

The year-to-date strong relative performance is not due to superior returns on my current equity ETFs. My TIPS ETFs have done okay relative to AGG, but they aren't exactly boosting the return. VGSH isn't helping too much either. So, what has it been? I have had positive returns from three ETFs, two of which I no longer hold and one of which is down a lot year-to-date that I just repurchased recently, and there has been some good trading. I plan to give a performance attribution after the end of Q2 for this quarter.

How Can I Help You?

I enjoy analyzing ETFs and stocks, and I like sharing my thinking in writing. I am working on starting a subscription service at Seeking Alpha. What things would you as an investor like to see offered?

If you are an investment professional, I would like to work with you as well. I can help educate financial consultants about the ETFs, and I can work with management at investment firms to help create model portfolios or potential ETF investments. Please let me know if your firm would be interested in this.

My ETF articles at Seeking Alpha, written under the alias The Intelligent ETF Investor, share a lot of my ideas.