This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

The 3 Rs of Fine Tuning Your ETF Portfolio: Review, Rebalance, Reinvest

NEW YORK (Fabian Capital Management) -- The midpoint of the year is often a great time to step back and assess your exchange-traded funds portfolios' strengths and weaknesses relative to your investment goals. With six months of data in the rear-view mirror, you can clearly evaluate your best- and worst-performing positions to determine if changes need to be made or new opportunities sought out.

In addition, many savvy investors take this time to rebalance existing positions or reinvest quarterly dividends as a result of distributions that are sure to be hitting your brokerage account in the near future. All of these small changes can add up to a great deal of performance enhancement as we make our way through the latter half of the year.

1. Review

The first step in this process is to review every position in your portfolio. This is particularly important as the market sits near all-time highs and has gone nearly 20 months since testing its 200-day moving average.

This year has presented some wide divergences amongst individual sectors, market caps, and asset classes. A quick look at the nearly 5% gap between the 6.39% year-to-date gain in the SPDR S&P 500 ETF (SPY) and the 1.48% gain in the iShares Russell 2000 ETF (IWM) shows just how much different this year looks from 2013.

The initial bout of volatility that we experienced in the first quarter truly shifted the market mindset from chasing fast growth stocks to repositioning capital in stalwart dividend paying companies. We are also seeing marked strength in defensive sectors such as the Utility Select Sector SPDR (XLU) over high beta themes such as the Consumer Discretionary Select Sector SPDR (XLY).

The multi-year low in the CBOE VIX Volatility Index (VIX.X) is another cautionary warning sign that we may be due for another modest wave of fear in the near future as well.

If you find yourself still overweight high-beta areas such as small-caps, Iternet stocks or retail sectors, you may want to consider paring back those positions in light of their recent underperformance. If we do see a more persistent pullback this summer, those weaker names could certainly lead on the downside.

One potential conservative equity alternative is the PowerShares S&P 500 Low Volatility Portfolio (SPLV), which has continued to hold up quite well this year and offers a monthly dividend stream as well. This offers you the ability to still participate in an equity ETF with potentially less risk than a fully-loaded stock index.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,155.34 +23.37 0.14%
S&P 500 2,002.95 +3.97 0.20%
NASDAQ 4,557.4070 +4.6480 0.10%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs