The Smart Money Model Portfolios

Every pundit, newsletter writer, broker, investment manager, and financial adviser has a model portfolio. This article combines the best of the best, from professionals whose compensation depends on performance, not the amount of assets they attract.

Here at the Whisperer we have scoured the universe of model portfolios that are touted by the investment industry. We look for one thing and one thing only – performance. And not just past performance, but the sustainability of past performance going forward. How do we do this? By examining the methodology behind the models. We look for things like originality, rational assumptions, logical arguments, and practicality when it comes to implementing and maintaining the model in question.

We start with three simple and straightforward models that are easy to understand, implement, and maintain. To figure out which model is best for your specific needs and circumstances, you will need to consider your time frame, risk preferences, and investment objectives. We will provide guidance throughout this process, and we’re fairly certain that you’ll find a model that fits you like a glove.


Model 1. Simple, low cost, easy maintenance.

If you’re looking for an ultra-simple, easy to maintain portfolio, this one’s for you. 3 ETFs that combined, cover about 80% of the investable universe. The table below shows the allocations among these three ETFs based on your time frame – long, medium, or short-term. I use 10 years or more as long-term, 6-9 years as intermediate, and less than 6 years as short-term. You may define things differently, but the point is that the closer you are to needing to tap into your invested money, the more conservative you should be.

Later in this article I show the returns, and other statistics for each of the 3 portfolios.

model etf portfolio - basic


Model 2. Enhanced Basic, moderate cost, moderate maintenance.

This model builds on the previous one by adding 2 more asset classes – small cap value and real estate. The effect is to dampen volatility and make the portfolio more diversified.

model etf portfolio - enhanced

Model 3. Advanced Basic, moderately high cost, high maintenance.

This model portfolio goes further by adding 2 more asset classes. It provides a smoother ride, but slightly lower returns due to increased diversification. If you don’t mind managing 7 ETFs, and you are looking for a solid and smooth ride, this portfolio is for you.


model etf portfolio - advanced


Annual returns for the three basic model portfolios over the last 10 years.

model etf portfolio stats


Final thoughts

So there you have it. These three model portfolios are the bedrock of portfolio design as envisioned by the Smart Money. You could do worse than simply adopting one of these models for your own purposes. But it’s going to get better as we move forward. Next time we’ll talk about risk management overlays to these portfolios and how they can boost returns while lowering risk. Does that sound impossible? It isn’t. I’ve been doing this for clients since 2005.


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