Active vs. Passive

  • A few days before we visited Vinder at his office, the advisor had met a new client with approximately $30 million in assets. He built the 53-year-old a model that’s 40% equities, 55% fixed income and 5% cash. That’s the efficient frontier for this client; the average allocation across his client base comes to 50% equities, 43% fixed-income; 5% managed futures, and 2% cash.
  • The new client’s stocks are split into small-, mid-, and large-caps, and further divided into growth and value categories—all through ETFs. In total, the portfolio uses 25 ETFs. Vinder looks for ETFs with the lowest possible fees, which means one less obstacle in matching the index’s return.
  • The client gets exposure to traditional overseas markets through iShares MSCI EAFE (ticker: EFA). Emerging markets is split between the iShares MSCI Emerging Markets (EEM) and Vanguard MSCI Emerging Markets (VWO). Bond holdings include PowerShares National Muni Bonds (PZA), iShares iBoxx $ Investment Grade Corporate Bond (LQD) and the SPDR Barclays Capital High Yield Bond Index (JNK), which currently yields 7.1%.

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