Pros and Cons of Someone Else's Mousetrap

JD Steinhilber is one of the regular contributors at ETF Investor. There is an article of his up about his taking more defensive action of late which includes changes to his model portfolios.

You can click on the image to see details.

While I am not 100% certain, I believe the ETFs in his ownership universe have been the same for many months. Perhaps the healthcare ETF is different.

The big plus to this allocation is that is is simple to assemble and follow. There are not a lot of moving parts and this strikes me as being very much a top down strategy.

The first negative that comes to mind is that it does not really take advantage of some of the product innovation that has come out in the last couple of years. I believe the only newish product is the one closed end fund, Kayne Anderson (KYN).

Using a few narrower products can help add some performance. Obviously the use of any narrower based products requires more time spent which is not what everyone wants to do, fair enough.

In JD's portfolios the range of large cap weightings is 20-30% depending on allocation. Something like DVY could be a large cap proxy. It has done better than the S&P 500 and has a much higher yield, 3.57%. This is just an example and not meant to be a recommendation.

I've written countless times about my preference to isolate certain countries as well. This is also not captured in a very broad approach.

The point of this post is not to criticize by any means. If you have read JD's content you know he knows his stuff. The point here is that investment products allow investors to capture many parts of the market, enhance yield and perhaps isolate parts of the market where there is extra expertise based on personal experience.

As I have been writing since the beginning, I think it is important to learn about the new products that come, weigh out their potential utility and perhaps invest in at some point.