About the Editor
Samuel Lee is an ETF strategist for Morningstar and editor of Morningstar ETFInvestor, a monthly investment newsletter. Prior to becoming editor, Lee was a fund analyst on Morningstar's passive funds research team, where he covered alternative, dividend, and actively managed ETFs and performed quantitative modeling of ETF strategies.

Lee joined Morningstar in 2008 as a data analyst, where he evaluated ways to measure and improve the firm's data quality.

Lee holds a bachelor's degree in economics, with honors, from Grinnell College.


Investment Strategy
Morningstar ETFInvestor scans the globe for value and improving fundamentals across virtually all asset classes. Editor Samuel Lee draws upon academic and practitioner research — including Morningstar's sizeable bench of stock, bond and fund analysts — to find reliable drivers of outperformance.

Morningstar ETFInvestor features two real-money portfolios.

The ETF Income Portfolio assembles a high-quality collection of income-generating ETFs with the goal of earning 5% in excess of the 30-day T-bill rate over a full business cycle. The portfolio adheres to a benchmark-agnostic strategy in its search for absolute returns.

The ETF Global Asset Allocation Portfolio, on the other hand, is more benchmark sensitive. It seeks undervalued asset classes with improving fundamentals. The strategy seeks to beat the 60/40 MSCI ACWI/Barclays US Aggregate benchmark over a full business cycle, with the least risk possible.

 
 
Dec 19, 2014
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About Editor Editor's Photo
Samuel Lee,
Editor, Morningstar ETFInvestor
Samuel Lee is an ETF strategist for Morningstar and editor of Morningstar ETFInvestor, a monthly investment newsletter. Prior to becoming editor, Lee was a fund analyst on Morningstar's
Featured Posts
When the Bear Roars
At some point, financial assets will suffer big losses. Nauseating, panic-inducing, puke-out-your-guts losses. What will you do then?

I’m not asking because I’m predicting a bear market. In fact, the U.S. economy looks hale and the stock market is still in an upswing (a good predictor of short-run performance). I’m asking because I think many investors have fooled themselves into thinking they’re contrarians. Buying the dips is easy and natural because each one over the past few years has reversed itself. I don’t know many investors scrambling to dump stocks—quite the opposite.

Many are misjudging their risk tolerance and will sell out at the next bottom. It’s tautological that they will: Bear markets occur when there’s widespread capitulation and by definition end at the point of maximum pessimism. Among the capitulators will be legions of erstwhile buy-and-hold, contrarian investors.

True contrarians are rare creatures with weird, perhaps dysfunctional, brain wiring. They’re not prone to envy, content to let their fad-chasing neighbors make big (but temporary) fortunes. They’re not swayed by popular opinion, dismissing it as popular folly. They enjoy the dislocations created by market collapses, secretly rejoicing with each wave of terror-induced selling. They interpret the world through the cold lens of logic, numbers, and probability. Less charitably put, they are misanthropes with psychopathic tendencies.

If you don’t fit this profile, then you need a realistic, robust plan that takes into account the fact that you are a normal human being and not a robot. And you need to hammer it out before markets go into a tailspin (which they will—we just don’t know when). By then, it’ll be too late, and your thinking will have been contaminated by the swirling contagion of fear.

If you’re near or in retirement, you need to think extra hard about this issue, because there are no second chances. You don’t have a lifetime of earnings ahead of you to make up for big mistakes.

How will your portfolios hold up if we enter into a secular bear market? What do you intend to do? Please email me at samuel.lee@morningstar.com. I’ll follow up with my thoughts and my plans in an email next week.

Portfolio Updates
I continue to add PIMCO Dynamic Credit Income PCI in my personal accounts. I’ll add to the ETFInvestor’s positions if its discount continues to widen. The recent widening of high-yield spreads has been driven by fears largely unrelated to economic fundamentals. The collapsing price of oil is good for the U.S. economy and therefore good for the majority of firms issuing high-yield debt (obviously, not for debt issued by firms tied to the price of oil).

In the Income Portfolio, I intend to fund any purchases with cash. In the Asset Allocation Portfolio, I’ll fund it by trimming Vanguard FTSE Developed Markets VEA, which has a similar expected return (5% or so after inflation) but more fundamental risk and negative momentum.

Regards,

Samuel Lee
Strategist
Editor, ETFInvestor

P.S.  As a reminder, the December issue of ETFInvestor came out yesterday. Download it here.

Interesting Links

Andrew Ross Sorkin interviews Ray Dalio at the Dealbook conference.

Portfolio Holdings
Income Portfolio
ETF
YTD Ret %
Price $
4.7
108.5
CASH$
N/A
1.0
-4.2
55.8
1.0
62.2
-0.8
11.6
-14.3
20.8
9.7
31.6
4.2
40.2
13.4
24.8
Global Asset Allocation Portfolio
ETF
YTD Ret %
Price $
3.6
108.5
CASH$
N/A
1.0
-4.2
55.8
-8.7
20.8
5.4
31.6
4.2
40.2
-7.5
38.6
6.5
81.2
13.4
24.8
Most Popular ETFs
ETF Name
YTD Rtn %
3 Yr Rtn %
Trading Vol.
NASDAQ 100 Trust Shares
-10.76
1.45
125,000,944
SPDRs
-3.64
2.68
87,466,496
Semiconductor HOLDRs
-6.23
-11.66
26,838,700
iShares MSCI Japan Index
-6.59
7.18
17,256,500
iShares Russell 2000 Index
-7.46
6.43
16,210,700
Energy Select Sector SPDR
15.88
15.50
14,900,000
Financial Select Sector SPDR
-8.42
2.61
11,612,800
DIAMONDS Trust, Series 1
-3.75
2.21
7,350,600
Utilities Select Sector SPDR
6.84
6.82
3,848,200
Materials Select Sector SPDR
-4.31
8.50
2,179,300
 
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