A Model Portfolio Emphasizing Longevity | ETF Trends

Advisors looking to position client portfolios for the long-term should consider model portfolios dedicated to that objective.

The Siegel-WisdomTree Longevity Model Portfolio, which is part of WisdomTree’s broader Modern Alpha model portfolio series, fits that bill.

“The collaboration with Professor Siegel brings a unique solution to investors with mid- to long-range time horizons who are trying to balance current income needs with longevity risk,” according to WisdomTree. “The Siegel-WisdomTree Longevity Model Portfolio was designed to outperform a traditional 60/40 portfolio in a risk-conscious manner by structurally allocating more toward equities over fixed income and tilting toward factors such as dividend yield and low P/E ratios to seek higher income generation and outperformance potential. The models are strategic in nature but also reflect tactical tilts based on market conditions. The strategy may include both WisdomTree and non-WisdomTree ETFs.”

Quality and Better Approach to Value

The Siegel-WisdomTree Longevity Model Portfolio features exposure to equities, fixed income, and commodities. Currently, the model portfolio devotes 72% of its weight to equities via a dozen ETFs encompassing domestic and international stocks, including developed and emerging markets.

The model portfolio is also diverse in terms of market cap exposure as it features allocations to large-, mid- and small-cap stocks. Another positive trait with this model portfolio is that represents potentially better avenues to factor investing, including accessing the quality and value factors.

For example, the WisdomTree U.S. Earnings 500 Fund (NYSEArca: EPS) is one of the equity foundations. EPS seeks to track the price and yield performance, before fees and expenses, of the WisdomTree U.S. LargeCap Index.

Under normal circumstances, at least 95% of the fund’s total assets (exclusive of collateral held from securities lending) will be invested in component securities of the index and investments that have economic characteristics that are substantially identical to the economic characteristics of such component securities. The index is a fundamentally weighted index that is comprised of earnings-generating companies within the large-capitalization segment of the U.S. Stock Market.

EPS targets an earnings-weighted index that screen for positive cumulative earnings over their most recent four fiscal quarter period and assigns weights to components to reflect the proportionate share of the aggregate learning’s each company generated, so those with greater earnings have larger weights. That gives the fund value and quality tilts.

The $401.7 million EPS, which debuted in February 2007, requires that member firms be profitable and allocates over 24% of its weight to technology stocks.

For more on how to implement model portfolios, visit our Model Portfolio Channel.

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.