Published on by Michael Johnston on September 11, 2009 | Updated February 11, 2014

Portfolio Strategy

The Sky Is Falling ETFdb Portfolio is designed for investors who are pessimistic on the short term outlook for the U.S. and broader global economy. Our inspiration for this ETFdb Portfolio comes from several sources, including gold bugs like Bud Conrad, advocates of commodity investing like Jim Rogers, and noted value investors like Warren Buffett. We have also taken note of countless analysts and investors predicting a double dip recession.

We have tilted this ETFdb Portfolio heavily towards low-risk investments that tend to perform well in uncertain or adverse economic environments, including gold, commodities, and inflation-protected securities. While we retain a small allocation to equities in this portfolio, this portion is dominated by value and defensive equities that generally experience smaller declines in down markets. While some investors may wish to avoid exposure to equities altogether in bear markets, we believe that ignoring this asset class completely is short-sighted, and as such have given a a quarter allocation to equities. This allows investors to participate in any upside if the markets rise while limiting the downside risk in a bear market.

This ETFdb Portfolio likely will not return huge gains in a bear market, but should do an excellent job of preserving capital as more aggressive strategies face significant declines. Investors wishing to make a more aggressive bet on declines in the equity markets may wish to eliminate all equity holdings from the portfolio, or perhaps even consider the inclusion of inverse equity ETFs.

• Risk Tolerance: Low. This portfolio is designed for active investors looking to shift away from risky investments towards risk-free securities in the face of a coming bear market. With a focus on capital preservation in a rocky economic environment, this ETFdb Portfolio is constructed to minimize volatility and declines in asset value.
• Time Horizon: Short. For all but the most risk averse investors, an allocation of 25% to equities is inappropriate over the long-term. This ETFdb Portfolio is designed for use by investors utilizing a tactical asset allocation strategy, shifting their asset class allocations as economic outlooks change.
• Current Income: High. This ETFdb Portfolio is weighted towards fixed income investments that provide a relatively stable return. Even the equity portion of this ETFdb Portfolio is weighted with value stocks that tend to exhibit high dividend yields.

Portfolio Snapshot

Below are the holdings and allocations for the Sky is Falling ETFdb Portfolio. For each ETF included in this portfolio, we have also provided alternative funds that offer similar exposure.