Some investors relish the opportunity to build their own portfolio by researching and picking individual bonds and stocks to buy. They love following those positions, planning an exit – and then doing it over and over again for many years. Others find that idea incredibly daunting.
Don’t fret – you can build a diversified portfolio across asset classes quickly and easily by using multiasset ETFs.
Based on your risk tolerance or investing style, one of these nine asset-allocation ETFs could be a great way to cover most of your investing goals in just one single position.
iShares Core Growth Allocation ETF
The largest asset allocation fund out there with about $1.2 billion under management, AOR is a simple way to build a diversified core portfolio focused on growth investing, all in one low-cost ETF. This is a "fund of funds" from across the iShares family, including seven picks such as the firm's flagship iShares Core Total USD Bond Market (IUSB) bond fund as well as its iShares Core S&P ETF (IVV) for domestic equity exposure. There is also a smattering of international investment, small-cap stocks and other growth-oriented investments throughout.
iShares Core Aggressive Allocation ETF
Very similar is the AOA fund, which has the same fee structure and only a slightly smaller asset tally at $930 million. It also uses a small list of seven iShares funds to build its portfolio. Where it differs is in a slightly more aggressive allocation of its assets – in case you didn’t figure that out from the name. Specifically, this fund prioritizes the S&P index fund allocation, with almost 40% of the holdings in this area alone, followed closely by 30% international exposure via the iShares Core MSCI International Developed Markets ETF (IDEV).
SPDR SSGA Global Allocation ETF
A slightly different twist is this SPDR fund. It, too, is a "greatest hits" listing of top funds from this major ETF provider. But the list is deeper at 22 total holdings. The biggest position is the iconic SPDR S&P 500 ETF Trust (SPY), but that makes up just under 20% of the total portfolio. And the deeper bench of holdings allows GAL to include more sophisticated holdings like an real estate investment trust fund or a junk bond fund as well as conventional international or corporate bond ETFs. All in all, it's a well-rounded holding.
Gadsden Dynamic Multi-Asset ETF
If you don't particularly like the idea of a big ETF provider repackaging its various funds for you, then Gadsden offers a global, diversified investment strategy via its GDMA fund that picks and chooses from what it sees as the very best opportunities. At present, this includes roughly 15% of the fund in a Vanguard Treasury bond fund and another 10% in an iShares inflation-protected bond fund as the top holdings. There's also plenty of stocks at home, in developed markets and in emerging markets as well. You may not get the same name recognition of larger fund-of-funds, but Gadsden does have more flexibility to pursue what it sees as the very best options at present.
Virtus Private Credit Strategy ETF
Another twist on the conventional fund-of-funds model is this Virtus ETF. While it, too, is an amalgamation of funds, it is focused on publicly traded business development companies (BDCs) as well as closed-end funds – not ETFs. BDCs function almost like private equity funds, in which these corporations deploy capital in debt and equity investments for small- and mid-sized enterprises and then pass a portion of their investment returns on to shareholders. Closed-end funds, such as top holding Oxford Land Capital Corp. (OXLC), are quite similar. For those who are unimpressed by multiasset funds made up of familiar stock and bond ETFs, this is an interesting way to access a variety of investments you couldn’t otherwise get to.
Pacer WealthShield ETF
While these multiasset ETFs are a mix of stocks and bonds, what happens if one side of that strategy is clearly superior to the other? Well, for investors who are worried about diversification but unwilling to hang on to a doomed asset in tough times, there's the WealthShield fund from Pace that uses a rules-based strategy to switch between a bias towards stocks, a bias toward Treasury bonds or a blend between the two. In hostile market conditions this fund may live up to its name and prove a wise investment as a way to shield your wealth from a serious downturn.
DeltaShares S&P International Managed Risk ETF
Taking the prior strategy a step further is this DeltaShares fund that layers in international investments instead of domestic companies. The portfolio at present includes a smattering of large-cap stocks from developed markets across Europe and Asia, including Switzerland's Nestle SA (NSRGY) and Japan's Toyota Motor Corp. (TM), but it maintains the option of investing in risk-management strategies, "seeking to limit losses during sustained market declines."
Cambria Tail Risk ETF
Though not as active as WealthShield or the DeltaShares fund, this Cambria fund is similar insofar as it is as much a form of portfolio insurance as a way to invest. The fund uses a sophisticated strategy that deploys out-of-the-money options on the stock market – that is, contracts that are normally super cheap to buy but only make you money if the market drops materially – in conjunction with intermediate U.S. Treasurys. The result is a diversified fund that pretty much goes nowhere in an up market. But it will not only protect your wealth in a downturn but perhaps generate a sizeable return.
First Trust Multi-Asset Diversified Income Index Fund
Another diversified fund with a tactical bent is this First Trust ETF that is focused on income-generating investments. These include stocks like MLPs and REITs, junk bond funds and preferred stock investments. The top holding is the First Trust Tactical High Yield ETF (HYLS), but there are a host of other individual equities such as energy pipeline player Buckeye Partners (BPL) or real estate company New York Mortgage Trust Inc. (NYMT).