Building a diversified portfolio out of Claymore Exchange-Traded Funds

Scotia iTrades recently announced that its clients can buy or sell 46 ETFs without a commission. Most of the ETFs in the list are Claymore ETFs and I gave some thought to how an investor would go about building a diversified portfolio out of the names in the list. The rules for building the portfolio are: (1) Broad diversification. The portfolio will not make narrow sector bets such as oil sands, agriculture, natural gas or water. This one rule alone would eliminate 19 ETFs from the list. (2) Limited set of asset classes. The portfolio will focus on the traditional asset classes, i.e., cash, government bonds and stocks. Real estate will be the only alternative asset class in the portfolio. This rules out another seven ETFs that track corporate bonds, junk bonds, preferred shares, commodities etc. (3) No income products. The portfolio is assumed to be suitable for an investor in her accumulation stage and does not depend on income from the portfolio. Full Article…