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.

 
 
Sep 21, 2014
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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
Replacing PowerShares S&P 500 Low Volatility SPLV
As a reminder, the September edition of ETFInvestor came out last Friday. Click here to download it.

This morning I (finally) swapped out PowerShares S&P 500 Low Volatility SPLV for Schwab US Dividend Equity SCHD in both the Income and Asset-Allocation portfolios. I’d been meaning to make this trade for some time now.

This swap was done without paying too much heed to tax efficiency, because these trades cannot be justified after taxes (except maybe over 10 years). SPLV and SCHD offer largely redundant exposures to the value and quality factors. The switch is like going from Sam’s Club to Costco—not a big difference overall, but still an improvement. SCHD is the better fund because it’s cheaper, lower-turnover and has much more capacity. This is not to say SPLV is a bad fund. If I were locked into SPLV with lots of capital gains in a taxable account, I personally would not take the tax bite to switch over to SCHD.

The trades reduce our effective economic exposure to U.S. stocks. The reduction is smaller than it looks because SPLV is less volatile than SCHD. The trades partly offset the increased equitylike risk I took on by adding to our PIMCO Dynamic Income PDI and PIMCO Dynamic Credit Income PCI positions early last month.

Income Portfolio Trade Summary
Sold all 514 shares of PowerShares S&P 500 Low Volatility SPLV for $34.87 each, lowering it to 0% of the portfolio from 11.1%.

Bought 300 shares of Schwab US Dividend Equity SCHD for $38.64 each, raising it to 7.2% of the portfolio from 0%.

Asset-Allocation Portfolio Trade Summary
Sold all 475 shares of PowerShares S&P 500 Low Volatility SPLV for $34.88 each, lowering it to 0% of the portfolio from 10.2%.

Bought 300 shares of Schwab US Dividend Equity SCHD for $38.64 each, raising it to 7.1% of the portfolio from 0%.

Regards,

Samuel Lee
Strategist
Editor, Morningstar ETFInvestor

Disclosure: I own all the funds in the Income and Asset-Allocation Portfolios.

Portfolio Holdings
Income Portfolio
ETF
YTD Ret %
Price $
4.4
108.8
CASH$
N/A
1.0
5.4
61.4
3.3
63.6
0.9
11.8
-2.3
22.8
15.3
32.8
2.1
39.4
5.2
35.2
8.2
23.7
Global Asset Allocation Portfolio
ETF
YTD Ret %
Price $
3.8
108.8
CASH$
N/A
1.0
5.4
61.4
0.6
22.8
12.8
32.8
2.1
39.4
5.2
35.2
-1.4
41.1
3.5
78.7
8.2
23.7
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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