All-ETF Portfolio Wins, at the Cost of Yield

A reader recently reminded me that about a year ago (June 27, 2006, to be exact), I posted a very detailed all-ETF portfolio on my blog. It was an academic exercise to see whether I could use narrow-based ETFs to capture the value of a single-stock portfolio with less volatility and risk. He wanted to know how it had performed. The fast answer is that it appears to have done well, with a total return of 22.46%. (The S&P 500 is up 20.46% in the same period.)

But I'm less interested in the exact performance than in what the experiment proves.

Before we discuss the results, let's look at the portfolio. To be crystal clear, I don't have this portfolio for anyone. I still believe in (and even prefer) individual stocks, and advocate a mix of individual stocks and ETFs. And honestly, I'd completely forgotten about this academic exercise, so I haven't made any changes to it since I loaded it into Morningstar last June. ...