Energy Bull ETFdb Portfolio

Published on by on December 16, 2011 | Updated February 14, 2013

Portfolio Strategy

Intermediate Current IncomeThe Energy Bull ETFdb Portfolio is designed for investors who wish to construct a well rounded portfolio that is tilted towards the energy sector. The portfolio may appeal to those who are bullish on the global economic recovery and wish to position themselves favorably as energy demand continues to grow across developed and emerging markets alike. Although exposure to the energy sector is often times associated with volatility, there are several potential benefits for those willing who can stomach the risk.

Investments in the energy sector, particularly in oil & gas companies, can be used a s tactical tool to hedge against inflation, since rising oil prices translate into higher prices for gasoline, which is necessary to transport all sorts of goods that we consume everyday across long distances. This sector may also prove as a formidable defensive play for investors worried about geopolitical tensions in the Middle East going forward. It is important to note that increasing exposure to this sector is essentially placing an indirect bet on continuing emerging market growth, which is certain to be a key driver for energy prices going forward.

The asset allocation strategy for this ETFdb Portfolio was constructed with higher risk tolerant investors in mind. We chose to focus on ETFs whose underlying assets are comprised of securities of companies engaged in the business of producing various types of energy, while also selecting funds that provide deep and broad-based exposure to a variety of sectors in order to diversify our portfolio.

This ETFdb Portfolio maintains 85% of its holdings in equities and 15% in commodities, consistent with a general asset allocation strategy for investors who are willing to take on risk and have a relatively long-term investment horizon. We have also filled out our fixed income component with MLPs for this ETFdb Portfolio, as we believe this particular sector can offer valuable diversification and return enhancement benefits. The commodity component of this portfolio is intended to help smooth out overall volatility and enhance risk-adjusted returns over the long run. Each of the components in this ETFdb Portfolio provides investors with access to multiple energy sub-sectors such as oil, coal, and natural gas while maintaining a diversified geographic profile; featuring allocations across the U.S. as well as developed and emerging markets.

Risk/Return Profile

  • Risk Tolerance: High. With an allocation to equities of 85%, this ETFdb Portfolio maintains a relatively high risk profile.
  • Time Horizon: Long. Investors with a shorter horizon may wish to make a larger allocation to fixed income securities to reduce the overall expected volatility.
  • Current Income: Moderate. With a modest allocation to MLPs, (which generally maintain relatively high dividend yields), this ETFdb Portfolio is expected to generate a moderate current return.

Portfolio Snapshot

Below are the components of this ETFdb Portfolio, along with alternative ETFs for each investment:

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