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Diversifying Through ETFs


For the industrial sector, the client has 8% in the Rydex Equal Weight S&P Industrial Fund (RGI) and 3% in the PowerShares Water Portfolio (PHO), which results in an equal weight.

I like RGI because many of the sector funds have huge positions in General Electric (GE), which I don't want to own. With PHO, I believe in the water theme as a powerful long-term investment thesis.


Energy is a sector where I want a lot of foreign exposure. As chronicled earlier , most clients own WisdomTree International Energy Sector Fund (DKA). This particular client has an 8% weight in DKA and 2% in one of the Chinese oil majors for an equal weight in the sector.


For the consumer sector, the one ETF I use is iShares Dow Jones U.S. Consumer Goods Sector Index Fund (IYK). For this client, it represents 10% of the portfolio, and the rest of the sector is made up of individual stocks.

In this sector, I want mostly domestic exposure, as I feel the brand names are worth owning. While the fund is not perfect, I like the heavier weighting to Altria (MO). While its 15% weighting in Procter & Gamble (PG) may not be ideal, the concentration is nowhere near as heavy as a lot of other cap-weighted funds. However, its 1.7% yield is only fair compared to other ETFs in this sector.


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