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Each "Best Of" page feature the ETPs which hold the "A+" score in each
individual metric, including: Liqiduity, Expenses, Performance, Volatility,
Dividend, and Conentration; the "Best Of" pages also highlight the
overall "A+" rated ETP from each category.

Alternatives
Bonds
Commodity
Currency
Diversified Portfolio
Equity
Inverse
Leveraged
Real Estate
Volatility
Realtime
ETFdb Category Liquidity Expenses Performance Volatility Dividend Concentration
Overall

Agricultural Commodities DBA TAGS CTNN DBA n/a n/a NIB

All Cap Equities USMV SCHB USMV TUTT ITOT VTI ITOT

Alternative Energy Equities PBW ICLN QCLN PZD TAN PBD FAN

Asia Pacific Equities EWT VPL FKO DVYA FKO VPL VPL

Building & Construction XHB XHB XHB FLM XHB FLM XHB

California Munis CMF CMF PWZ PWZ PWZ CMF CMF

China Equities FXI EWH ASHS FNI CXSE ECNS ECNS

Commodities DBC BCD GSC USCI n/a n/a COMT

Commodity Producers
GDX XME SILJ MOO GOEX HAP GUNR
Equities

Communications Equities IYZ VOX FONE IXP VOX FONE VOX

XLY FDIS CARZ IYC BJK VCR VCR


Consumer Discretionary
Equities

Consumer Staples Equities XLP FSTA FXG VDC VDC IYK VDC

Corporate Bonds LQD VCLT SKOR FLOT LWC CIU CRED

Currency UUP FXSG FXE CYB BZF n/a CYB

Diversified Portfolio AOR AOK PERM WBII YYY MDIV AOK

Emerging Markets Bonds EMB VWOB EMSH KCNY EMSH VWOB VWOB

Emerging Markets Equities EEM SCHE ERUS FM SDEM VWO EEMV

Energy Equities XLE FENY PXE FILL VDE FILL FENY

Europe Equities EZU FLEU HEDJ HEUV HEWI VGK VGK

Financials Equities XLF FNCL IAI KBWP PSP VFH VFH

Foreign Large Cap Equities EFA SCHF PIZ EFAV IDV TLTD IEFA

Foreign Small & Mid Cap


SCZ VSS DLS SCHC CNDA VSS VSS
Equities

Global Equities VEU IDEV TOK VEGA SDIV VT VT

Global Real Estate IFGL REET VNQI RWO DRW VNQI VNQI

Government Bonds TLT SCHO STPP SHY EDV ITE ITE

Health & Biotech Equities XLV VHT BBH PPH XHS VHT VHT

Hedge Fund QAI PUTW ALFA CPI n/a n/a MCRO

High Yield Bonds JNK HYLB HYXU SRLN HYLD GHYG JNK

Industrials Equities XLI FIDU XAR RGI IPN VIS VIS

Inflation-Protected Bonds TIP SCHP WIP STIP WIP WIP WIP

International Government
BWX IAGG GGOV BWZ BWX BWX IGOV
Bonds

Inverse Bonds TBF TAPR DLBS DTUS n/a n/a TBF

Inverse Commodities DGZ DNO DGZ DGZ n/a n/a DNO

Inverse Equities JDST MELT EUM DOG n/a n/a SH

Inverse Volatility XIV IVOP XIV XXV n/a SVXY IVOP

Japan Equities EWJ HGJP DBJP JPMV DXJS SCJ DBJP


Large Cap Blend Equities SPY SCHX SPXV PBP QYLD PBP SCHX

Large Cap Growth Equities QQQ SCHG IWY WBIE IWY IUSG IWF

Large Cap Value Equities DIA SCHV SYV WBIL DIV EXT VYM

Latin America Equities EWZ EWW EWW AND DBBR GML ILF

Leveraged Bonds TBT TBT TTT TBZ n/a n/a TBT

Leveraged Commodities DGAZ DYY DGLD UGL n/a n/a SCO

Leveraged Currency EUO URR YCS EUO n/a n/a URR

Leveraged Equities SDS FIEG RTLA CEFL n/a n/a CEFL

Leveraged Multi-Asset n/a DVHL n/a n/a n/a n/a n/a

Leveraged Real Estate DRN MORL DRN REK n/a n/a URE

Leveraged Volatility TVIX UVXY TVIZ TVIZ n/a UVXY UVXY

Long-Short RALS DYB RALS CHEP n/a n/a RALS

Materials XLB FMAT PSCM XLB IRV VAW VAW

Metals DBB UBM LD DBB n/a n/a UBM

Mid Cap Blend Equities MDY SCHM RWK CZA CZA VXF IWR

Mid Cap Growth Equities IWP VOT IVOG JKH FNY IWP IWP

Mid Cap Value Equities IWS VOE PXMV IVOV DON EZM VOE

MLPs AMLP TPYP MLPG YMLP YMLP EMLP MLPA

Money Market BIL CLTL GSY SHV GSY MINT MINT

Mortgage Backed Securities MBB VMBS CMBS MBG MBG VMBS VMBS

National Munis SHM VTEB XMPT SUB XMPT MUB MUB

New York Munis PZT NYF NYF NYF PZT NYF NYF

Oil & Gas USO USO UGA DBE n/a n/a DBE

Precious Metals GLD IAU PALL PPLT n/a n/a SGOL

Preferred Stock/Convertible
PFF CWB CWB PGF SPFF PFF PFF
Bonds

Real Estate IYR SCHH MRRL REM DXJR FREL VNQ

Small Cap Blend Equities IWM SCHA SMLL SMD PZI VTWO SCHA
Small Cap Growth Equities IWO VBK IJT PXSG PXSG VTWG VBK

Small Cap Value Equities IWN VBR RZV VIOV DES VTWV VBR

Target Retirement Date n/a n/a n/a n/a n/a n/a n/a

Technology Equities XLK FTEC FDN XLK XSW VGT VGT

Total Bond Market AGG SCHZ BIV FTSM PCEF BND BND

Transportation Equities IYT XTN XTN SEA SEA XTN SEA

Utilities Equities XLU FUTY GRID PUI XLU PXR VPU

Volatility VXX VIXM XVZ XVZ n/a n/a VIXM

Volatility Hedged Equity PHDG FDLO VQT VQT VIXH PHDG PHDG

Water Equities PHO TBLU FIW CGW CGW CGW CGW


Aggressive ETFdb Portfolio
Published on by ST O YAN BO JI NO V on AUGUST 11, 2011 | Updated NOVEMBER 20, 2014

Portfolio Strategy

The Aggressive ETFdb Portfolio is designed for clients with a high risk
tolerance and willingness to accept volatility in their investment
portfolios, in exchange for potentially very lucrative returns. The risk and
return of this ETFdb Portfolio may be ideal for younger investors
interested in growing assets over a relatively long time and willing to
accept a fair amount of volatility in order to do so.
The Aggressive ETFdb Portfolio will also likely appeal to investors with a
bullish outlook for the global economy and minimal need for current
returns through fixed income allocations.
This ETFdb Portfolio is inspired by an aggressive investment strategy
that follows an allocation of roughly 80% equity and 20% fixed income.
The equity allocation is tilted towards large cap stocks, although
exposure as a whole is fairly well diversified across all market cap levels,
industries, and economic regions. On the fixed income side, this ETFdb
Portfolio invests exclusively in emerging market bonds, an asset class
with a sizable degree of risk and the potential for stellar uncorrelated
returns.
This portfolio is likely too risky for retired investors with very strict current
income needs, but may appeal to younger investors with a long time
horizon and an above average ability and willingness to take on risk.
Risk Tolerance: High. This portfolio is designed with risk-averse

investors in mind given its very heavy allocation to equities and lack
of safe haven U.S. bond market exposure which is a core
component in most other portfolios.

Time Horizon: Long. Investors with a long term view will benefit most
from this portfolio since the risk/return profile for many of the equity
holdings in this portfolio can be very rewarding to those who can
stomach the risk over many years, and increase their potential to
achieve diversification benefits as well as enhanced returns.

Current Income Needs: Low. Exposure to fixed income instruments


is minimal in this portfolio, although the selected holdings offer very
attractive yields given their emerging market exposure.

Portfolio Snapshot

Below are the holdings and allocations for the Aggressive ETFdb
Portfolio. For each ETF included in this portfolio, we have also provided
alternative funds that offer similar exposure.
Expense Alternative
Ticker ETF Asset Type Allocation
Ratio ETFs
State Street
Domestic
SPY SPDR S&P 15.0% 0.09% VOO, IVV
Equities
500
iShares S&P Domestic
IJH 15.0% 0.15% MDY, IVOO
MidCap 400 Equities
Vanguard
Domestic
VB Small-Cap 10.0% 0.16% IWM,SCHA
Equities
ETF
Vanguard
Emerging International
VWO 20.0% 0.20% EEG, EEM
Markets Equities
ETF
PowerShares
BLDRS International
ADRD 15.0% 0.30% EFV, FDT
Developed Equities
Markets 100
Guggenheim
Frontier International
FRN 5.0% 0.65% PMNA
Markets Equities
ETF
iShares
JPMorgan Fixed
EMB 10.0% 0.60% PCY
Emerging Income
Bond Fund
WisdomTree
Emerging
Fixed
ELD Markets 10.0% 0.55% EMLC,EBND
Income
Local Debt
Fund
Weighted Average Expense Ratio 0.28%

Historical Return
Analysis
Ticker 2009 2010 2011 2012 2013
The adjacent table SPY 26.3% 15.0% 1.2% 16.0% 32.3%
provides historical results IJH 37.8% 26.7% -2.2% 17.8% 33.5%
VB 36.0% 28.1% -2.8% 18.3% 37.7%
for each component of
VWO 75.3% 19.5% -18.7% 19.2% -4.9%
this ETFdb Portfolio, as
ADRD 29.0% 3.0% -9.6% 16.6% 22.9%
well as backtested results FRN 54.3% 33.9% -22.4% 12.3% -14.6%
(as available) for the EMB 15.3% 10.9% 7.7% 16.9% -7.8%
entire portfolio from 2008 ELD n/a n/a -2.2% 14.4% -10.8%
to 2012. The table also Portfolio n/a n/a -6.2% 17.0% 13.5%
shows how this ETFdb Compare to SPY 26.3% 15.0% 1.2% 16.0% 32.3%
Compare to AGG 3.3% 6.4% 7.7% 3.8% -2.0%
Portfolio performed
relative to a popular stock
market benchmark (SPY) and bond benchmark (AGG).

Following the most recent financial crisis its not much of a surprise that
emerging market equities, as represented by VWO, declined the most,
while domestic large caps managed to hold their ground better. Its also
worth noting that emerging market bonds, as tracked by EMB, proved to
be quite the nontraditional safe haven during the economic downturn,
as well as stable sources of return in the years of recovery following.

The varying degrees of gains and losses during both the recession and
recovery reveals the importance of staying diversified across market cap
levels as well as economic regions regardless of the fact that this
portfolio follows an aggressive investment strategy.

Portfolio Expenses

This ETFdb Portfolio is designed for long-term use consistent with a


buy, hold, and rebalance strategy. As such, minimization of expenses
is necessary to avoid return erosion resulting from compounding costs.
To this end, we constructed a portfolio with a weighted-average expense
ratio of 28 basis points, which is significantly lower than fees charged by
actively-managed mutual funds. The impact of this reduced cost
structure over a hypothetical time horizon of 30 years is significant:
Growth of $1 Million Over 30 Years @ Annual
Return Of:
Expense
Portfolio 5% 10% 15%
Ratio
Aggressive ETFdb Portfolio 0.28% $3,984,090 $16,145,058 $61,469,980
Actively-Managed Mutual
1.00% $3,243,398 $13,267,678 $50,950,159
Fund Portfolio

Holdings Overview
Below is a brief overview of each component of this ETFdb Portfolio.

SPY: This is one of the biggest ETFs on the market, and tracks the
widely-followed S&P 500 Index.
IJH: This ETF tracks the performance of the mid capitalization sector
of the U.S. equity market.
VB: This fund tracks the MSCI US Small Cap 1750 Index, which
represents the universe of small-capitalization companies in the U.S.
equity market.

VWO: This ETF gives broad based exposure to the performance of


emerging market stocks.
ADRD: The underlying index of this ETF is capitalization-weighted
and designed to track the performance of approximately 100
developed market-based depositary receipts.
FRN: This ETF tracks the performance of depositary receipts, in ADR
or GDR form, that trade on the London Stock Exchange, New York
Stock Exchange, NYSE Amex and Nasdaq Stock Market of
companies from countries that are defined as the frontier market.
EMB: This ETF tracks a diverse U.S. dollar denominated index
consisting of emerging market debt instruments.
ELD: This fund gives investors access to local debt denominated in
the currencies of emerging market countries.

Portfolio Risk Analysis

This ETFdb Portfolio spreads its exposure across the risk continuum,
including significant weightings to domestic and international equities as
well as emerging market bonds. The result is a portfolio with fairly high
risk exposure and well-diversified holdings.

Equity funds with


mainly large-cap equity holdings, like SPY, are towards the safer end
of the spectrum, while emerging market exposure without a introduces a
great amount of risk in this portfolio.
Equity Overview
This ETFdb Portfolio contains an allocation of 80% to equities, including
both domestic and international stocks. A significant portion of this
ETFdb Portfolios equity holdings are in giant and large cap stocks,
which may have some drawbacks given inherent biases towards
financial services and energy companies.

Large cap equities tend to be more stable than mid cap stocks, but may
also offer less growth potential. Although correlation between equities of
different sizes is strong, the inclusion of mid cap, small cap, and micro
cap equities in this portfolio certainly offers excellent diversification
benefits, and also offers exposure to companies that have the potential
to experience significant growth.
The equity portion of this ETFdb Portfolio is equally split between U.S.
and international exposure. Historically, U.S. equities have tended to be
more stable than equities listed in developing economies. However, we
feel that including foreign equities coincides well with this portfolios
aggressive theme. Allocating half of our equity holdings to international
stocks certainly increases our risk, however, it simultaneously offers the
potential to achieve uncorrelated returns and ideally improve the
portfolios overall risk/return profile.

SPY [Fact Sheet]


SPY is the biggest ETF on the market and this fund is without a doubt
considered by many a benchmark for U.S. equity market performance.
This behemoth of a fund is on the cheaper end of the expense spectrum
and it offers unparalleled liquidity and one of the most active options
markets period, making it an irresistible choice for investors and active
traders alike.

This fund offers exposure to the 500 largest companies in the U.S.
equity market, making it a reliable barometer of broad domestic stock
market performance. Unlike many other large cap funds, this ETF does a
nice job of avoiding a top-heavy portfolio, allocating about one-fifth of
total assets in its top 10 holdings. From a sector perspective, SPY is
incredibly balanced across nearly every industry in the U.S. economy;
top five allocations in descending order include technology, financial
services, energy, industrials, and health care. Given its title it shouldnt
be much of a surprise that SPY is titled towards giant and large cap
corporations, which we believe is a necessary exposure making this fund
a core holding.
Cost conscious investors who wish to minimize expenses over the long
run should consider VOO as a cheaper alternative which tracks the
same index as SPY.

IJH [Fact Sheet]


IJH offers exposure to the mid cap sector of the U.S. equity market and it
tracks the performance of 400 companies. The fund is not top-heavy by
any means and it offers well diversified exposure across multiple corners
of the economy. Industrial and technology holdings account for the
greatest portion of this funds portfolio , while exposure is rounded out
nicely with the inclusion of consumer cyclical, health care, and real
estate companies.

Mid cap equities tend to bear a slightly different risk/return profile than
their large cap counterparts, although the two assets classes are
certainly heavily correlated. For example, in 2010 IJH returned a stellar
25%, while SPY lagged behind and gained just over 12% in that same
time period.

VB [Fact Sheet]
VB provides access to the small cap corner of the U.S. equity market
and it does so through a deep portfolio of over 1,700 holdings. While this
fund may be riskier than SPY for example, it does an excellent job of
minimizing company-specific risk by allocating less than 3% in the top 10
holdings.Top three allocations by sector include technology, industrials,
and consumer cyclical.

We feel VB is a core holdings within the equity component of this


portfolio since it follows our aggressive themed investment strategy given that small
cap equities have historically provided larger returns than bigger companies in times of
economic prosperity, but also more volatility and the potential to seriously slump during hard
times.

VWO [Fact Sheet]


This ETF tracks the MSCI Emerging Markets Index, a popular
benchmark that measures the performance of more than 850 stocks in
over 20 emerging market economies. While emerging markets are
without a doubt a more risky investments, looking back at history we see
that they have outperformed developed markets by a wide margin during
the recovery from the most recent recession, demonstrating the
importance of an allocation economies of all sizes. VWO is a bit biased
towards financial services companies from a sector allocation
perspective, although exposure is still fairly well balanced across all
sectors of various emerging market economies.

We like VWO over the iShares MSCI Emerging Markets Index Fund
(EEM) since it offers virtually the same exposure for a much cheaper
expense fee.
ADRD [Fact Sheet]
ADRD tracks the performance of 100 multinational companies based in
a range of developed markets. Top allocations by country include United
Kingdom, Japan, and Switzerland. The inevitable tilt towards giant cap
size companies brings upon the tendency to overweight financial
services and energy companies, a common inefficiency of many popular
emerging market funds. Likewise, the portfolios is a bit top-heavy,
allocating over one-third of its assets in ten companies.
This fund is by no means towards the high-end of the cost spectrum,
however, investors should still take a closer look at SCHF which offers
cheaper broad-based international equity exposure.

FRN [Fact Sheet]


This ETF invests in foreign equities across frontier markets based upon
an evaluation of gross domestic product growth, per capita income
growth, experienced and expected inflation rates, privatization of
infrastructure and social inequalities of the local economy. FRN is an
appealing option for risk-averse investors given the tremendous potential
for profit coupled with the inherently high-risk of investing in frontier
market economies. This fund does a nice job of splitting exposure
between large and mid cap size companies, although it still falls in the
common pitfall of overweighing the financial services and energy
sectors. Asset allocation from a country perspective is also risky from
a correlation perspective since South American economies dominate this
funds portfolio; top three holdings by country are Chile, Colombia, and
Argentina.
Fixed Income Overview
Despite the diversification across sizes and geographies within the
equity component of this ETFdb Portfolio, many of these funds maintain
relatively high correlations with each other (as evidenced below). For
aggressive investors fixed-income exposure should not be ruled out as a
core holding. In order to smooth overall volatility and follow through with
our aggressive approach, we have allocated 20.0% of this ETFdb
Portfolio to two emerging market fixed income funds: EMB and ELD.
These ETFs provide exposure to the investment grade segment as well
as the more speculative corner of the international bond market.

EMB [Fact Sheet]


This ETF gives investors broad exposure to actively traded debt
instruments in emerging market countries, all of which are denominated
in U.S. dollars. The credit-quality of the underlying holdings EMB are
what give this ETF its lucrative high risk/return profile within the fixed-
income space. Over three-fourths of the funds holdings are rated BBB or
lower, while allocation to safer debt is roughly 10%. The majority of this
funds holdings are also towards the longer end of the maturity spectrum
and top allocations by country include the Mexico, Turkey, Russia,
Brazil, and the Philippines.
EMB offers a juicier yield than most U.S. Corporate Bond funds, but it is
by no means appropriate for conservative investors looking for safer
exposure within the global fixed-income market.

ELD [Fact Sheet]


This fund gives investors access to local debt denominated in the
currencies of emerging market countries, adding potential benefits of
dollar-diversification. The top three holdings by country are Indonesia,
Malaysia, Mexico, and Brazil. ELD is safer than EMB, as a majority of
the funds holdings are rated A or higher, and have maturities of mostly
less than 10 years. This ETF holds around 100 debt issues and it
allocates one-third of its total assets to the top ten holdings alone.

Because the underlying debt securities are denominated in local


currencies, ELD delivers some dollar diversification that may be useful if
the greenback struggles relative to the value of emerging market
currencies. We like the inclusion of both dollar-denominated and local
currency-denominated currency exposure in this ETFdb Portfolio, as this
approach spreads out the risk associated with unhedged currency
exposure while still allowing investors to benefit from appreciation of
emerging market currencies.

EMLC offers an alternative that also taps into local currency


denominated emerging markets debt. That funds top allocations by
country are Brazil, Poland, South Africa, Mexico, Turkey, and Malaysia.

ETF Correlation Matrix


Diversification is a key
component of any client portfolio. The chart above shows the correlation
between each component of theAggresive ETFdb Portfolio over the last
two years.
As is expected, there is a very strong correlation between the equity
components in this ETFdb Portfolio, amongst both domestic and foreign
equities. The fixed income elements of this ETFdb Portfolio add minimal
diversification benefits, as these ETFs maintain fairly strong positive
correlation with the remainder of the portfolio, certainly a drawback for
the portfolio given its lack of traditional U.S. treasury holdings.

ELD is a fairly new fund in the ETF space and it lacks sufficient returns
data to be included in the correlation chart above, however, investors
can anticipate that it bears very close resemblance to EMB.

Disclaimer

The information herein is not represented or warranted to be accurate,


correct, complete, or timely. Past performance is no guarantee of future
results. All investors should read applicable prospectuses before
investing.

From time to time, the authors of this report or other employees of ETF
Database may have a long or short position in securities referred to
herein. The factual statements herein have been taken from sources we
believe to be reliable, but such statements are made without any
representation as to the accuracy or completeness or otherwise.
Moderate ETFdb Portfolio
Published on by MI CHAEL JO HNST O N on JANUARY 18, 2010 | Updated NOVEMBER 20, 2014

Portfolio Strategy

The Moderate ETFdb Portfolio is designed for clients who maintain some
degree of risk tolerance and willingness to accept volatility in their
investment portfolios, but a desire to avoid excessively risky assets and
extreme fluctuations . The risk and return of this ETFdb Portfolio may be
ideal for investors interested in growing assets over a relatively long time
and willing to accept a moderate amount of volatility in order to do so.
The Moderate ETFdb Portfolio may also be used as a starting point for
more active traders without a strong opinion as to the short to
intermediate-term performance of the financial markets. As investors
become more bullish, a shift towards equities may be appropriate, while
a deteriorating outlook may call for a shift into fixed income securities.
This ETFdb Portfolio is inspired by a moderate investment strategy that
follows an allocation of roughly 60% equity and 40% fixed income. In
addition, although many investors have shied away from real estate
investments in recent years, we believe this asset class can still provide
valuable return enhancement and diversification benefits (particularly
over the long term), and as such have given it a minor 5% allocation
(reducing our equity allocation to 55%).
The equity allocation is tilted towards large cap U.S. stocks through IWB,
but maintains material weightings in small and mid cap domestic
equities, as well as international markets, both emerging and developed.
On the fixed income side, this ETFdb Portfolio invests exclusively in
government bonds, and maintains a high weighting towards inflation
protected securities.
This portfolio may be excessively risky for retired investors with very
strict current income needs, but may have an unnecessarily large
allocation to bonds for those investors with a long time horizon and an
above average ability and willingness to take on risk.
Risk Tolerance: Moderate. This ETFdb Portfolio is designed for

investors with an average risk tolerance, meaning they want more out
of their portfolio than low, stable returns, but also want to avoid
excessive risk and volatility. A large number ofinvestors will find this
level of risk appropriate for their retirement portfolios, especially those
with a number of years remaining before their anticipated retirement
date.

Time Horizon: Long. This ETFdb Portfolio is constructed for


investors with a relatively long time horizon, although it can also be
used by more active traders who are uncertain on the short-term
prospects of the market.
Current Income Needs: Moderate. With a meaningful allocation to
fixed income holdings, including high-quality corporate bonds, this
ETFdb Portfolio should deliver some degree of current income to
investors. For those expecting to live exclusively off the money
generated from their portfolio, these proceeds may not be sufficient.

Portfolio Snapshot

Below are the holdings and allocations for the Moderate ETFdb Portfolio.
For each ETF included in this portfolio, we have also provided alternative
funds that offer similar exposure.
Expense Alternative
Ticker ETF Asset Type Allocation
Ratio ETFs
iShares
Russell Domestic
IWB 25.0% 0.15% SPY, IVV
1000 Index Equities
Fund
iShares
Russell Domestic
IWM 10.0% 0.28% MDY, IJR
2000 Index Equities
Fund
Schwab
International
SCHF International 10.0% 0.09% ADRD, EFA
Equities
Equity ETF
Vanguard
Emerging International
VWO 10.0% 0.20% EEG, EEM
Markets Equities
ETF
BND Total Bond Fixed 20.0% 0.10% AGG, LAG
Market ETF Income
InvesTop
Corporate Fixed
LQD 10.0% 0.15% BIV
Bond Index Income
Fund
iShares
Barclays Fixed
TIP 10.0% 0.20% TIPZ
TIPS Bond Income
Fund
Vanguard
VNQ Real Estate 5.0% 0.10% RWR, IYR
REIT ETF
Weighted Average Expense Ratio 0.15%

Historical Return
Analysis
Ticker 2009 2010 2011 2012 2013
The adjacent table IWB 28.1% 16.0% 1.2% 16.5% 32.3%
provides historical results IWM 28.5% 26.9% -4.4% 16.7% 38.7%
SCHF n/a 9.3% -12.7% 18.8% 18.9%
for each component of
VWO 75.3% 19.5% -18.7% 19.2% -4.9%
this ETFdb Portfolio, as
BND 3.4% 6.2% 7.9% 3.9% -2.1%
well as backtested results LQD 8.6% 9.3% 9.8% 10.6% n/a
(as available) for the TIP 8.0% 6.1% 13.3% 6.4% -8.5%
entire portfolio from 2008 VNQ 30.1% 28.4% 8.6% 17.6% 2.3%
to 2012. The table also Portfolio n/a 13.8% 1.0% 13.0% 12.0%
shows how this ETFdb Compare to SPY 26.3% 15.0% 1.2% 16.0% 32.3%
Compare to AGG 3.3% 6.4% 7.7% 3.8% -2.0%
Portfolio performed
relative to a popular stock
market benchmark (SPY) and bond benchmark (AGG).

Not surprisingly, this ETFdb Portfolio struggled in 2008 amidst a broad


market recession and again in 2011. In 2009, 2010, and 2012 this
ETFdb Portfolio reclaimed much of the ground lost during 2008. Notice
the significant outperformance of the bond market versus this portfolio
during the most recent downturn.

Many equity ETFs in this ETFdb Portfolio have suffered significant


losses over the last year, as the global recession hammered equity
prices around the world. These dismal returns highlight the importance
of even minimal allocation to fixed income ETFs in this ETFdb Portfolio.
Notice that all of the bond funds included in this portfolio were able to
post positive returns during the stock market rebound in 2009, 2010, and
2012.

Notice that VWO was by far the worst performer during the market slump
in 2008, however, this ETF turned in a stellar performance the following
year, further extending gains into 2010.

Portfolio Expenses

This ETFdb Portfolio is designed for long-term use consistent with a


buy, hold, and rebalance strategy. As such, minimization of expenses
is necessary to avoid return erosion resulting from compounding costs.
To this end, we constructed a portfolio with a weighted-average expense
ratio of 15 basis points, which is significantly lower than fees charged by
actively-managed mutual funds. The impact of this reduced cost
structure over a hypothetical time horizon of 30 years is significant:
Growth of $1 Million Over 30 Years @ Annual
Return Of:
Expense
Portfolio 5% 10% 15%
Ratio
Moderate ETFdb Portfolio 0.15% $4,135,175 $16,728,928 $63,594,490
Actively-Managed Mutual
1.00% $3,243,398 $13,267,678 $50,950,159
Fund Portfolio

Holdings Overview
Below is a brief overview of each component of this ETFdb Portfolio.
IWB: This ETF offers exposure to the Russell 1000, one of the most
widely-followed and broad-based benchmarks for U.S. equities. The
Russell 1000 is weighted towards large cap equities, but contains
some mid-size firms as well.
IWM: This ETF tracks the Russell 2000 Index and includes a well-
diversified basket of small-cap and mid-cap stocks.

SCHF: This ETF offers is linked to the FTSE Developed ex-U.S.


Index, which includes more than 1,400 international stocks in over 20
developed markets.

VWO: This ETF holds stocks listed in more than a dozen emerging
markets around the world, offering exposure to a part of the global
economy that is expected to increase in importance in coming
decades.
BND: This ETF offers exposure to investment grade sector of the
U.S. corporate bond market, including corporate bonds, Treasuries,
and debt issued by agencies of the U.S. government.
LQD: This ETF offers investors exposure to high-quality corporate
bonds while avoiding investments in speculative junk bonds.
TIP: This ETF invests in inflation-protected securities, meaning that
real returns are generally guaranteed regardless of the level of price
increases that may eat into nominal returns.
VNQ: This ETF offers exposure to U.S. real estate markets. While
this asset investment class is risky (as evidenced by the recent
declines in value), we believe can provide enhanced returns and
diversification benefits, and deserves a minor allocation in this
portfolio.

Portfolio Risk Analysis

This ETFdb Portfolio spreads its exposure across the risk continuum,
including significant weightings to everything from inflation-protected
Treasuries to emerging market equities and domestic real estate. The
result is a portfolio with moderate risk exposure and well-diversified

holdings.

Equity Overview

This ETFdb Portfolio contains an allocation of 55% to equities, including


both domestic and international stocks. A significant portion of this
ETFdb Portfolios equity holdings are in large and giant cap stocks,
which generally have a market capitalization of more than $10 billion.

Large cap equities tend to be more stable than mid cap stocks, but may
also offer less growth potential. Although correlation between equities of
different sizes is strong, the inclusion of mid cap, small cap, and micro
cap equities in this portfolio does offer some diversification benefits, and
also offers exposure to companies more likely to experience significant
growth. Through IWB and IWM, this portfolio maintains exposure to the
largest 3,000 U.S.-listed equities.

The equity portion of this ETFdb Portfolio is tilted towards stocks listed
and operating primarily within the U.S., but does include material
allocations to international stocks in both emerging and developed
markets. Historically, U.S. equities have tended to be more stable that
equities listed in developing economies, although this has not
necessarily been the case in recent this years. For investors looking to
avoid exposure to U.S. equities, our Ex-U.S. ETFdb Portfolio outlines an
effective strategy.

IWB [Fact Sheet]


IWB offers exposure to the Russell 1000 Index, a benchmark investing in
large, liquid U.S. securities. We have given a significant allocation to
IWB because this ETF generally serves as a reliable barometer of broad
U.S. equity markets. And while the companies held by IWB are listed on
U.S. stock exchanges, they are generally global firms that generate a
significant portion of revenues from overseas operations. This provides
some degree of international diversification within the domestic equities
portion of this ETFdb Portfolio.
Compared to S&P 500 ETFs such as IVV and SPY, which are perhaps
more popular options for achieving large cap exposure, IWB offers
increased depth of holdings at a slightly higher cost (although the 0.15%
expense ratio is still very attractive).
IWM [Fact Sheet]
IWM is linked to the Russell 2000 Index, which includes U.S.-listed
stocks ranked 1,001 to 3,000 by market capitalization. Between IWB and
IWM, this ETFdb Portfolio maintains exposure to thousands of domestic
stocks at a very low cost.
While the majority of domestic equity exposure in this ETFdb Portfolio is
achieved through large cap equities, including small and mid cap funds
can provide valuable return enhancement and diversification benefits.
The median market capitalization of the Russell 2000 is only about $400
million, considerably smaller than the $4 billion median figure for IWB.

SCHF [Fact Sheet]


SCHF tracks the FTSE Developed ex-U.S. Index, which includes more
than 1,400 equities in 20 different developed markets. SCHF is heaviest
in financials (approximately one quarter of holdings), but has allocations
to every major of the global economy. By country, SCHF allocates its
holdings primarily to developed markets in Europe (such as Germany,
France, and the UK) and the Asia Pacific (such as Japan).
VWO [Fact Sheet]
Vanguards emerging markets ETF tracks the MSCI Emerging Markets
Index, a benchmark that measures the performance of more than 750
stocks in 20+ developing economies. While emerging markets have
historically been perceived as more risky investments, they
outperformed developed markets by a wide margin during the recovery
from the most recent recession, demonstrating the importance of an
allocation to this sector.

We chose VWO over the iShares MSCI Emerging Markets Index Fund
(EEM) for two reasons: 1) competitive expense ratio (0.20% vs. 0.67%)
and 2) the full replication strategy of VWO (EEM uses a sampling
strategy).
Fixed Income Overview
Despite the diversification across sizes and geographies within the
equity component of this ETFdb Portfolio, many of these funds maintain
relatively high correlations with each other (as evidenced below). For risk
averse investors looking for a stable return, fixed income investments
should be at the center of the portfolio. In order to smooth overall
volatility and achieve stable returns, we have allocated 40.0% of this
ETFdb Portfolio to three fixed income funds: TIP, BND, and LQD. These
ETFs provide exposure to the investment grade segment of the domestic
fixed income market while avoiding exposure to speculative securities
that may be inappropriate for investors with a moderate risk tolerance.

BND [Fact Sheet]


This ETFdb Portfolio achieves the majority of its fixed income exposure
through BND, which seeks to track the universe of investment grade
bonds available in the U.S. This ETF generally avoids exposure to high
risk debt, such as high yield or junk bonds, making it a key component
of any portfolio designed for investors with a moderate risk tolerance.

One potential shortcoming of BND is that it maintains a significant


allocation to low-risk Treasuries and securities issued by agencies of the
U.S. government. However, given the low risk tolerance of this ETFdb
Portfolio, focusing fixed income exposure on Treasuries seems prudent.
Investors looking to enhance the current return may wish to shift part of
the BND allocation toLQD.
LQD [Fact Sheet]
Because this ETFdb Portfolio makes such a significant allocation to fixed
income securities, we included an allocation to LQD in order to improve
the current return of this segment, particularly in environments
characterized by extremely low interest rates and yields on Treasuries.

LQD is designed to track the iBoxx $ Liquid Investment Grade Index, a


benchmark that measures the performance of 600 highly liquid
investment grade corporate bonds. This fund avoids exposure to high-
yielding debt issued by companies that is deemed to carry a significant
risk of default, but still features an attractive coupon.

TIP [Fact Sheet]


This ETFdb Portfolio protects against upticks in inflation by holding TIP,
an ETF that invests in inflation-protected Treasuries. Inflation-protected
securities are a vital component of any client portfolio in the current
economic environment, and deserve a significant allocation among fixed
income investments in most situations. The principal of TIPs underlying
securities increases with inflation, meaning that investors in these
vehicles can lock in a real return without worrying about the erosion
caused by rising prices.

Overall, this ETFdb Portfolios fixed income holdings are heavy in high
quality bonds with a short to intermediate duration, thereby minimizing
credit risk and exposure to rising interest rates. This portfolio does
maintain a moderate allocation to corporate bonds through BND, but this
is limited to investment grade debt issues.

Real Estate Overview

While many investors now avoid exposure to real estate (besides direct
exposure through their residence), we believe this asset class can still
offer valuable diversification benefits, as well as opportunities for
enhanced returns in certain environments. We understand that
investments in the U.S. real estate market are risky plays, but believe
that when included with equity and fixed income investments this asset
class can reduce overall portfolio volatility.

VNQ [Fact Sheet]


We have allocated the small real estate exposure of this ETFdb Portfolio
to VNQ, a well-diversified, inexpensive, domestic real estate fund. This
ETF invests in REITs across a number of sectors, including industrial,
commercial, residential, and retail properties. With an expense ratio of
just 15 basis points, VNQ offers one of the cheapest options for real
estate exposure available anywhere.

Some investors may be understandably nervous about investing in U.S.


real estate markets, but still interested in achieving the benefits of
including this general asset class. Alternative global real estate ETF
options include:

Ticker ETF Expense


RWX SPDR DJ Wilshire International Real Estate 0.59%
WPS iShares S&P World ex-U.S. 0.48%
DRW WisdomTree International Real Estate Fund 0.58%

ETF Correlation Matrix

Diversification is a key
component of any client portfolio. The chart above shows the correlation
between each component of theModerate ETFdb Portfolio over the last
two years.
As is expected, there is a fairly strong correlation between the equity
components in this ETFdb Portfolio, including between domestic and
foreign equities. The fixed income elements of this ETFdb Portfolio add
meaningful diversification benefits to the portfolio, as these ETFs
maintain low correlations with equities and only moderate correlations
with each other. Since the adjacent chart reflects a relatively recent time
period, correlations between real estate and equity ETFs are high, and
may lessen over time.

The addition of TIP to the portfolio clearly adds valuable diversification


benefits, as this security maintains relatively low correlations with the
remaining holdings. Investors looking to further diversify their holdings
may want to consider an allocation to a broad based commodity fund,
such as DBC or DJCI.

30 Years Til Retirement ETFdb Portfolio


Published on by MI CHAEL JO HNST O N on SEPTEMBER 3, 2009| Updated NOVEMBER 20, 2014

Portfolio Strategy

The 30 Years Til Retirement ETFdb Portfolio is designed for clients who
expect to retire in approximately 30 years, and expect to live for
approximately 30 years following their retirement. This ETFdb Portfolio is
inspired by numerous widely-accepted investment strategies that
advocate an allocation of roughly 90% equity and 10% fixed income for
investors with these circumstances. Although many investors have shied
away from real estate investments in recent years, we believe this asset
class can still provide valuable return enhancement and diversification
benefits (particularly over the long term), and as such have given it a
10% allocation (reducing our total equity allocation to approximately
80%).
We have tilted the significant equity allocation towards large cap U.S.
stocks through IWB, but the majority of equity exposure in this ETFdb
Portfolio comes through small- and mid-cap U.S. equities and
international stocks.
This portfolio may be excessively risky for retired investors, but may
have an unnecessarily large allocation to fixed income investments for
investors facing a long time horizon and/or a relatively high ability to take
on risk.

Risk Tolerance: High. Since clients expect to be generating revenue


and accumulating wealth for another thirty years, they have the ability
to take on significant risks.
Time Horizon: Long. With 30 years remaining until the targeted
retirement date, clients have ample time to recover from any short-
term declines in value. This long time horizon contributes to the
enhanced risk tolerance.
Current Income Needs: Very Low. Since the client anticipates
working for another 30 years until retirement, current income needs
from the investment portfolio are minimal at present, and are
expected to remain low for the foreseeable future. This reduces the
need for significant fixed income allocations in this ETFdb Portfolio.

Portfolio Snapshot
Expense Alternative
Ticker ETF Asset Type Allocation
Ratio ETFs
iShares Russell Domestic
IWB 35% 0.09% SPY, IVV
1000 Index Fund Equities
Vanguard Mid-Cap Domestic
VO 15% 0.10% IWR, IJH
ETF Equities
iShares S&P
Domestic
IJR SmallCap 600 10% 0.16% IWM, RWJ
Equities
Index Fund
Vanguard
International
VWO Emerging Markets 15% 0.20% EEM,ADRE
Equities
ETF
PowerShares
International
ADRD BLDRS Developed 5% 0.30% PFA, IFSM
Equities
Markets 100 ADR
iShares Barclays
Fixed
AGG Aggregate Bond 2.5% 0.08% BND
Income
Fund
iShares Barclays Fixed
TIP 2.5% 0.20% TIPZ
TIPS Bond Fund Income
iBoxx $ InvesTop
Fixed
LQD TM Corporate 2.5% 0.15% n/a
Income
Bond Fund
iBoxx $ high Yield
Fixed
HYG Corporate Bond 2.5% 0.50% HYG
Income
Fund
Vanguard REIT
VNQ Real Estate 5% 0.15% IYR, ICF
ETF
iShares S&P World
WPS ex-U.S. Property Real Estate 5% 0.48% RWX,DRW
Fund
Weighted Average
0.16%
Expense Ratio

Historical Return
Analysis
Ticker 2009 2010 2011 2012 2013
The adjacent table IWB 28.1% 16.1% 1.2% 16.05% 32.8%
provides historical VO 40.5% 25.7% -2.1% 16.2% 35.0%
IJR 25.8% 26.7% 0.8% 16.3% 41.3%
results for each
VWO 75.3% 19.5% -18.7% 19.2% -4.9%
component of this
ADRD 29.1% 3.1% -9.6% 16.6% 22.9%
ETFdb Portfolio, as well AGG 3.4% 6.4% 7.7% 3.8% -2.0%
as backtested results (as TIP 9.0% 6.2% 13.3% 6.4% -8.5%
available) for the entire LQD 8.6% 9.4% 9.8% 10.6% n/a
portfolio from 2008 to HYG 28.8% 12.0% 6.8% 11.6% 5.8%
2012. The table also VNQ 30.1% 28.5% 8.6% 17.6% 14.5%
WPS 37.7% 18.2% -16.3% 39.7% 7.4%
shows how this ETFdb
Portfolio 35.9% 18.4% -2.6% 17.1% 22.2%
Portfolio performed Compare to SPY 26.3% 15.0% 1.2% 16.0% 32.3%
relative to a popular Compare to AGG 3.3% 6.4% 7.7% 3.8% -2.0%
stock market benchmark
(SPY) and bond benchmark (AGG).

Not surprisingly, this ETFdb Portfolio struggled in 2008 amidst a broad


market recession. In 2009 and 2010, this ETFdb Portfolio reclaimed
much of the ground lost during 2008. Notice the significant
outperformance of the bond market versus this portfolio during the most
recent downturn. Suffering only minimal loses in the 2011, this portfolio
was once again able to beat the market in 2012.

Many equity ETFs in this ETFdb Portfolio have suffered significant


losses over the last year, as the global recession hammered equity
prices around the world. These dismal returns highlight the importance
of even minimal allocation to fixed income ETFs in this ETFdb Portfolio.
Notice that all of the bond funds included in this portfolio were able to
post positive returns during the stock market rebound in 2009 and 2010.

Portfolio Expenses

This ETFdb Portfolio is designed for long-term use consistent with a


buy, hold, and rebalance strategy. As such, minimization of expenses
is necessary to avoid return erosion resulting from compounding costs.
To this end, we constructed a portfolio with a weighted-average expense
ration of 16 basis points, which is significantly lower than fees charged
by actively-managed mutual funds. The impact of this reduced costs
structure over the horizon of this portfolio is significant:

Growth of $1 Million Over 30 Years @ Annual


Return Of:
Expense
Portfolio 5% 10% 15%
Ratio
30 Years Til Retirement
0.16% $4,128,967 $16,704,958 $63,507,333
ETFdb Portfolio
Actively-Managed Mutual
1.00% $3,243,398 $13,267,678 $50,950,159
Fund Portfolio
Holdings Overview
Below is a brief overview of each component of this ETFdb Portfolio.

IWB: This ETF offers exposure to the Russell 1000, one of the most
widely-followed benchmarks for U.S. equities, and is weighted
towards large cap equities (although it also includes mid cap and
small cap firms).
VO: This ETF tracks a well-diversified basket of mid-cap stocks,
which generally have a market cap between $2 billion and $10 billion.
IJR: This fund offers exposure to equities of smaller companies,
which generally offer greater return characteristics but can be
significantly more volatile than larger equities.
VWO: This ETF offers diversified exposure to emerging markets,
which generally can offer significantly more risk and reward than
domestic equities.
ADRD: Whereas VWO offers exposure to emerging markets, this
ETF offers exposure to developed markets outside the U.S. Major
concentrations include the U.K., Japan, Spain, and France.
AGG: This ETF offers diversified exposure to the U.S. investment
grade bond market, including corporate debt, U.S. Treasuries, and
debt issued by U.S. agencies.
TIP: This ETF invests in inflation-protected securities, meaning that
real returns are guaranteed regardless of the level of price increases
that may eat into nominal returns.
LQD: This ETF holds investment grade debt issued by U.S.
corporations. Investment grade debt generally has a low risk of
default.
HYG: HYG invests in corporate debt securities that are rated below
investment grade (also known as junk bonds). These securities
have a higher likelihood of default, but also generally offer higher
yields than investment grade debt.
VNQ: This ETF offers exposure to U.S. real estate markets. While
this asset investment class is risky, it deserves some allocation in this
portfolio.
WPS: This ETF offers exposure to real estate markets outside of the
U.S. As evidenced by the recent economic recession, global real
estate investments may perform significantly better than those in the
U.S. in certain economic environments.

Portfolio Risk Analysis

This ETFdb Portfolio has a large allocation to risky securities, with


significant holdings in domestic and international equities. This portfolio
maintains a large portion of its holdings in equity investments, and the
majority of these holdings are allocated to mid cap and small cap
domestic stocks and international equities, which tend to be more risky
than large cap domestic equity investments (such as those included in

the S&P 500).


Equity Overview
This ETFdb Portfolio contains an allocation of roughly 80% to equities,
including domestic and international stocks. Just over one-half of this
ETFdb Portfolios equity holdings are giant and large cap stocks (which
generally have a market cap of more than $10 billion), while the
remaining equities is in mid cap, small cap, and micro cap funds.

Large cap equities tend to be more stable than mid cap stocks, but also
typically offer less growth potential. Although correlation between
equities of different sizes is strong, the inclusion of small and micro cap
equities in this portfolio does offer some diversification benefits, and also
offers exposure to companies more likely to experience significant

growth.
The equity portion of this ETFdb Portfolio is dominated by stocks listed
and operating primarily within the United States, but also includes a
moderate weighting to international equities. These equities tend to be
more risky than domestic stocks, making them appropriate for investors
with a moderately high risk tolerance and a long time horizon.
IWB [Fact Sheet]
IWB offers exposure to the Russell 1000 Index, a benchmark investing in
large, liquid U.S. securities. We have given a significant allocation to
IWB because this ETF generally serves as a reliable barometer of U.S.
equity markets. And while the companies held by IWB are listed on U.S.
equity markets, they are generally global firms that generate a significant
portion of revenues from overseas operations. This provides some
degree of international diversification within the domestic equities portion
of this ETFdb Portfolio. With an expense ratio of only 15 basis points,
IWB offers cheap, well-diversified equity exposure.

VO [Fact Sheet]
While the majority of domestic equity exposure in this ETFdb Portfolio is
achieved through large cap equities, including small and mid cap funds
can provide valuable return enhancement and diversification benefits.
VO invests exclusively in U.S.-listed mid cap companies (generally those
with a market capitalization between $2 billion and $10 billion). While
some investors prefer a barbell strategy that complements large cap
stocks with small caps, we believe mid caps can offer a unique return
profile, and are therefore worthy of inclusion in most portfolios.

IJR [Fact Sheet]


IJR invests in the smallest publicly-traded U.S. equities, focusing on
companies with a market capitalization of less than $2 billion. Small cap
equities have historically provided larger returns than bigger companies,
but also come with more volatility. We selected IJR because it provides
deep exposure to the small cap equity market by maintaining
approximately 600 individual holdings.

ADRD [Fact Sheet]


Many investors segment the equity component of their portfolios into two
categories: domestic and emerging markets, with U.S. equities receiving
the lions share of assets. We think this is a mistake, particularly in the
current economic environment. We have included ADRD in this ETFdb
Portfolio to gain exposure to international equities that have not
historically experienced the volatility characteristic of emerging markets.
With 100 holdings in more than a dozen developed countries (including
the UK, Japan, France, and Spain), ADRD reduces dependence on any
single country, something we believe is of vital importance.

VWO [Fact Sheet]


In addition to domestic and foreign developed equities, we continue to
believe in the importance of emerging market exposure for most U.S.
investors. While some believe that reductions in cross-border investment
restrictions have eliminated benefits of geographic diversification, we
think the discrepancies in market performance during the recent
recovery indicate otherwise. While many investors prefer EEM to gain
their emerging markets exposure, we prefer VWO because of its lower
expenses (20 basis points compared to 67 for EEM).

Fixed Income Overview


Despite the diversification across sizes and geographies within the
equity component of this ETFdb Portfolio, many of these funds maintain
relatively high correlations with each other (as evidenced below). In
order to smooth overall volatility and achieve stable returns, we have
split the 10% fixed income exposure of this ETFdb Portfolio between four
funds: AGG, TIP, LQD, and HYG.
AGG and TIP have heavy allocations to risk-free Treasuries and debt
issued by U.S. agencies, and both are limited to the investment grade
section of the U.S. bond market. While LQD invests in corporate bonds,
which are more risky than Treasuries, its holdings are limited to debt
issues that classify as investment grade, limiting the credit risk. All three
of these ETFs generally avoids exposure to high risk debt, such as high
yield or junk bonds. HYG, on the other hand, invests exclusively in debt
that is rated below investment grade. This ETF serves as a bridge
between less risky fixed income investments and more risky equity
investments.

AGG [Fact Sheet]


This ETF offers broad exposure to the investment grade sector of the
fixed income universe, an asset class that can smooth volatility and
provide much needed diversification from equities. Because AGG is
concentrated in Treasuries and bonds issued by agencies of the U.S.
governments, we have rounded out the fixed income component of this
portfolio with three additional ETFs.

TIP [Fact Sheet]


In addition to AGG, this ETFdb Portfolio protects against upticks in
inflation by holding TIP, an ETF that invests in inflation-protected
Treasuries. The face value of inflation-protected securities increases
with CPI, which results in higher coupon payments in high inflation
environments. We believe that an allocation to TIPs is a vital component
of any client portfolio in the current economic environment, and deserve
a significant allocation among fixed income investments in most
situations.

LQD [Fact Sheet]


We have added LQD to this ETFdb Portfolio to provide exposure to
investment grade corporate bonds, an asset class that we feel is
overlooked by a significant portion of investors. While all corporate debt
comes with the possibility of default, bond held by LQD are generally
issued by companies with strong balance sheets, stable results, and a
low likelihood of bankruptcy. LQDs yield is significantly higher than that
of AGG, providing a current income component for investors.

HYG [Fact Sheet]


HYG represents the most risky fixed income component in this ETFdb
Portfolio. This ETF invests in bonds that maintain significant risk of
default and are generally issued by companies with high debt balances
and uncertain future prospects. Because of these risk factors, high yield
or junk bonds typically have much higher yields than investment grade
securities. HYG acts as a bridge between the equity and fixed income
components of this ETFdb Portfolio.

Overall, this ETFdb Portfolios fixed income holdings are heavy in high
quality bonds with a short to intermediate duration, but do maintain a
moderate amount of exposure to fixed income investments with higher
yields (and higher risk).

Real Estate Overview

While many investors now avoid exposure to real estate (besides direct
exposure through their residence), we believe this asset class can still
offer valuable diversification benefits, as well as opportunities for
enhanced returns in certain environments. However, we believe that real
estate exposure should go beyond the U.S.

VNQ [Fact Sheet]


We have allocated half of the real estate component of this ETFdb
Portfolio to VNQ, a well-diversified, relatively inexpensive domestic real
estate fund. This ETF invests in REITs across a number of sectors,
including industrial, commercial, residential, and retail
properties. Investors should note that this fund, along with other ETFs
invested in the real estate market, may experience higher levels of
volatility.

WPS [Fact Sheet]


In order to limit exposure to U.S. real estate markets, we have allocated
5% of this ETFdb Portfolio to WPS, which invests in REITs in more than
20 countries outside the U.S. WPS is tilted towards developed markets
such as Hong Kong, Japan, and Australia, but also maintains exposure
to emerging markets such as China.

ETF Correlation Matrix

Diversification is a key component of any client portfolio. The chart below


shows the correlation between each component of the30 Years Til
Retirement ETFdb Portfolio over the last two years.

As is expected,
there is a fairly strong correlation between the equity components in this
ETFdb Portfolio, including between domestic and international equities
(both developed and emerging markets). The fixed income elements of
this ETFdb Portfolio add meaningful diversification benefits to the
portfolio, as these ETFs maintain low correlations with equities and only
moderate correlations with each other. Since the adjacent chart reflects
a relatively recent time period, correlations between real estate and
equity ETFs are high, and may lessen over time.
The addition of fixed income ETFs, particularly TIP, to the portfolio
clearly adds valuable diversification benefits, as this security maintains
relatively low correlations with the remaining holdings. Investors looking
to further diversify their holdings may want to consider an allocation to a
broad based commodity fund, such as DBC.