Advisors making New Year’s resolutions might want to consider revisiting their 60/40 portfolio construction, because low interest rates and high inflation, among other factors, could continue hindering the traditional stock/bond mix in 2022.
But there’s good news: There are plenty of credible alternatives to the 60/40 portfolio. These include the Siegel-WisdomTree Portfolios, which include two model portfolios that could be poised to benefit in a market environment with low bond yields and stretched equity valuations.
For example, the Siegel-WisdomTree Global Equity Model can help advisors looking to boost income streams in client portfolios, because this model features no fixed income exposure. Rather, it’s comprised of 13 ETFs, 10 of which are dedicated dividend funds.
Although the Siegel-WisdomTree Global Equity Model is 100% allocated to equity-based ETFs, it still offers high levels of diversification, which is a trait that shouldn’t be overlooked in the current risk climate.
To that point, the Siegel-WisdomTree Global Equity Model features exposure across the size spectrum, dipping into mid- and small-cap stocks in addition to large-caps. It also allocates 40% of its weight to ex-U.S. equities, both in developed and emerging markets.
The portfolio is a collaboration with Dr. Jeremy Siegel, professor of finance at The Wharton School, and was specifically designed to outperform the traditional 60/40 stock/bond mix by “structurally allocating more toward equities over fixed income and tilting toward factors such as dividend yield and low valuation ratios to seek
higher income generation and outperformance potential,” explains WisdomTree.
As of the end of September 2021, the model’s top three allocations included 15% in the WisdomTree U.S. Total Dividend Fund (DTD), 15% in the WisdomTree U.S. LargeCap Fund (EPS), and 12% in the Vanguard High Dividend Yield Index Fund ETF (VYM).
The model portfolio’s quality tendencies, which avail themselves in the form of dividend growth, could be advantageous at a time when advisors and clients are increasingly concerned about inflation.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
