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McCall’s Call: Build A Nest Egg In A Storm

By: IndexUniverse
Posted: 8/11/2011 9:09:00 PM
Referenced Stocks: IAU;IHE;JJG;JNJ;PFE

The market has hit the “reset” button over the last month and is now officially in correction mode after the first downgrade of U.S. debt in history. The somewhat expected downgrade S&P last Friday sent world markets to new 2011 lows and well off the multi-year highs set earlier this year.

Matthew D. McCall The sudden and dramatic selloff in nearly every asset class, except Treasurys, might be the start of a new bear market or the best buying opportunity of the year. I tend to lean towards the latter, and therefore feel it’s appropriate to look at ETFs that could be used to build a portfolio.

I’ll assume for the purpose of this discussion that an investor is new to the market, so the goal is to build an all-ETF portfolio from the ground up. And what better time to do this than after stocks have fallen more than 10 percent from their recent highs. So, I’ll highlight the 10 ETFs I think are now cheap and good long-term investments.

Sector ETFs

Some parts of the economy are going to do better than others, and luckily for ETF investors there are easy ways to gain exposure to those trending or dependable areas, such as healthcare.

Commodities

A boom in commodities is starting its second decade about now, so I view any pullbacks in materials, whether industrial or agricultural, as an opportunity to buy a hot asset class at bargain prices.

Even though many believe the commodity bull market is getting long in the tooth, several macroeconomic factors are still in place for the trend to continue.

Emerging Markets

A major part of the commodities boom is the demand pull from rapidly developing countries, such as Brazil, India and especially China.

High Income

Dependable fixed-income ETFs are essential to any credible asset allocation plan, and I have a couple that I often recommend.

Start Building

I consider the 10 ETFs above to be great starting points for the average investor who has at least 10 years until retirement.

Anyone nearing retirement may want to consider a more conservative allocation, perhaps one with an overweight of bonds that are due to mature sooner rather than later.

That said, we all have different risk levels and goals, and therefore individual investors should consult an advisor before making any decisions. Also, in the spirit of full disclosure, we currently own shares of JNK, ECON, IAU, JJG, and IHE.

Matthew D. McCall is editor of The ETF Bulletin and president of Penn Financial Group LLC, a New York-based wealth management firm specializing in investment strategies using ETFs.

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