Portfolio IQ: Advisor Allocates 78% in Equity ETFs

There are no obvious danger zones in the way Rick Wedell invests his personal portfolio, and that says a lot about his investing philosophy and economic outlook.

The chief investment officer at RFG Advisory in Birmingham, Ala., Wedell has agreed to share details of his portfolio as the first participant in the etf.com Portfolio IQ feature.

The point of this regular series is not to pass judgement on anyone’s individual investment strategy. Rather the idea is to show how professionals charged with managing assets for a living are viewing and navigating the markets and economy against the backdrop of their own lives and experiences.

Wedell, 45, is married and part of a dual income household. He’s Harvard educated and gained early experience in financial services at the private equity powerhouse Bain Capital.

He sums up his portfolio, which is spread across 10 ETFs and a 2% allocation to cash, as “invested alongside our clients” at RFG Advisory, a $5 billion financial advisory firm.

“My portfolio is very close to one of our client’s portfolios,” he said. “I believe in eating your own cooking.”

A Foundation of Passive Equity ETFs

The portfolio has a 78% weighting in equities, anchored by a 22.4% weighting in the Invesco FTSE RAFI US 1000 ETF (PRF), 20% in the SPDR Portfolio S&P 500 Growth ETF (SPYG), and 12% in the Dimensional World Ex US Core Equity 2 ETF (DFAX).

DFAX is effectively Wedell’s exposure to non-U.S. equity markets, which he characterizes as plenty.

“As far as international markets go, the United States continues to be the strongest economy in the world by a long shot,” he said. “I think some of the papers written in the ‘60s and ‘70s about having 40% or 50% invested in international stocks got it wrong.”

The rest of his equity exposure essentially acts as satellite allocations around the large-cap-stock foundation. There are 8% weightings in each of the following ETFs: the SPDR Portfolio S&P 400 Mid Cap ETF (SPMD), the Invesco Nasdaq 100 ETF (QQQM), and the SPDR Portfolio S&P 1500 Composite Stock Market ETF (SPTM).

On the fixed income side, the roughly 20% total allocation is comprised of 8% in the Vanguard Total Bond Market ETF (BND), 7.6% in the Fidelity Total Bond ETF (FBND), 2% in the SPDR Portfolio Long Term Treasury ETF (SPTL), and 2% in Janus Henderson AAA CLO ETF (JAAA).

With the exception of DFAX and JAAA, Wedell’s portfolio is all passively managed, low-cost index strategies. There’s no cryptocurrency and the 10% to 20% annual turnover suggests he’s happy leaving it alone.

“It’s never like, I’m going to buy Nvidia today, and I’m in the Warren Buffett Crypto-is-heroin camp,” he said. “I don’t check my portfolio very often, and when I retire, I suppose I’d look at it maybe once a month.”

The portfolio is mostly in qualified retirement accounts, which is where Wedell has the bulk of his investments.

He anticipates retiring in about 15 years and expects to get more conservative with his investing as he ages.

For perspective on how good and bad the financial markets can get, he reflects on the financial crisis of 2008 and seeing iconic investment bank Lehman Brothers collapse into bankruptcy.

“I remember sitting at a Bloomberg terminal watching the market in freefall,” he said. “The entire trading floor was almost paralyzed, and that lasted for a few days until our CIO came out and said, ‘nobody is getting fired today, now is the time to get to work.’”

Living through that period, Wedell said, “gives you respect for how bad things can get and what it feels like. But also gives you the knowledge and confidence to know that it isn’t the end of the world, and you can live through it.”