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Can a Single ETF Make an Entire Portfolio?

It is unlikely that GAL will ever deliver world-beating yields. The trailing 12-month yield is 2.84%. If interest rates normalize, then GAL's dividend could also go up. But if rates go up, then the bond funds in GAL should be expected to decline in price, posing another threat to performance.

There are at least two ways to use a fund like GAL. As mentioned above, one is to use it as a sole holding for the person who does not want to actively engage in watching or managing his or her portfolio but still wants to earn a positive long-term return on savings.
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The other way to use a fund like GAL would be in a core-and-explore type of portfolio with a few other narrower holdings. The funds owned by GAL are broad-based so they don't allow for any meaningful specialized exposures. There are many smaller countries, themes and, of course, individual stocks that will never be represented in a portfolio like the one under the hood of GAL. An investor may not want to spend the time required to manage 20-30 positions, but he or she could use GAL in conjunction with much smaller positions in a couple of thematic ETFs and maybe an individual stock or two.

Asset allocation funds can be useful for getting the job done, but they will never be great performers. They are intended to be slow and steady growers over long periods of time. Success with GAL will come from remembering the long-term objective and not growing impatient with what at times will be a very slow mover.

At the time of publication, Nusbaum had no positions in securities mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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