The 11 ETF Building Blocks Behind Beechhurst Capital Advisors’ Resilient Asset Allocation Model

A resilient portfolio starts with clear building blocks. We have structured our asset allocation model around liquid, low-cost ETFs that each play a defined role: growth, income, diversification, inflation defense, and downside protection. The result is a disciplined, global, multi-asset core that adapts to shifting macro regimes while staying simple enough to implement and rebalance with precision. Here are the 11 ETFs that we use to structure of simple asset allocation model.

Equities for Core Growth

• U.S. Markets (VTI) : The Vanguard Total Stock Market ETF captures virtually the entire investable U.S. equity universe, delivering broad beta across large-, mid-, and small-cap names—our primary engine of long-term capital appreciation.

• International Developed and Emerging Markets (VXUS) : The Vanguard Total International Stock ETF complements VTI with ex-U.S. exposure across regions and market caps, improving diversification by adding different earnings cycles, currencies, and sector mixes.

Fixed Income for Risk Management

• Core U.S. Bonds (BND): The Vanguard Total Bond Market ETF anchors the defensive sleeve with investment-grade Treasuries, agencies, mortgages, and corporates, aiming to dampen volatility and provide ballast in equity drawdowns.

• Global ex-U.S. Bonds (BNDX): The Vanguard International Bond Market ETF (hedged) adds high-quality sovereign and corporate bonds outside the U.S., enhancing breadth while minimizing currency noise in the fixed income sleeve.

• Extended Duration U.S. Treasuries (EDV): The Vanguard Extended Duration Treasury ETF concentrates long-duration U.S. Treasuries, which historically exhibit powerful negative correlation in risk-off shocks—amplifying convexity when it’s needed most.

Real Property Assets for Income

• U.S. Real Estate (VNQ): The Vanguard Real Estate ETF provides listed REIT exposure to sectors like industrial, residential, data centers, and healthcare, offering a blend of income potential and inflation sensitivity tied to underlying property cash flows.

• Global ex-U.S. Real Estate (VNQI): The Vanguard Global ex-U.S. Real Estate ETF extends property exposure internationally, diversifying lease structures, cap-rate dynamics, and regional growth trends beyond the U.S. cycle.

Macro Hedges and Inflation Diversifiers

• Gold (IAU): The iShares Gold ETF offers direct exposure to physical gold, a store of value that can hedge tail risks, debasement fears, and geopolitical shocks while adding a non-yielding but historically diversifying return stream.

• Broad Commodities, no K-1 reporting (PDBC): The Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF taps energy, metals, and agriculture via an optimized futures strategy, seeking both spot and roll-yield dynamics without partnership tax complexity.

• U.S. Dollar Strength (UUP): The Invesco DB US Dollar Index Bullish ETF provides tactical exposure to a stronger dollar versus major currencies—useful when global tightening, risk aversion, or relative U.S. growth drives USD outperformance.

Digital Assets

• Bitcoin Exposure (IBIT): The iShares Bitcoin Trust introduces a measured allocation to the leading digital asset via a regulated vehicle. Used judiciously, it can improve return potential and factor diversification given bitcoin’s distinct supply schedule and adoption-driven cycles.

Core Principals for Implementing Our Model

• Role Clarity and Risk Budgeting: Each ETF has a defined job—growth, ballast, inflation defense, or macro hedge. We allocate risk, not just dollars, sizing positions by their volatility, correlation, and drawdown behavior to avoid hidden concentration.

• Regime Awareness: Inflation trends, policy cycles, and liquidity conditions inform tilts. Equities drive wealth creation; duration buffers drawdowns; gold, commodities, and USD hedges address distinct macro “what-ifs.”

• Global Breadth with Cost Discipline: Broad-market, low-cost vehicles (VTI, VXUS, BND, BNDX) form the core. Satellite positions (EDV, IAU, PDBC, UUP, VNQ, VNQI, IBIT) target specific risks and opportunities without sacrificing simplicity.

• Rebalancing with Intent: We rebalance on schedule and around thresholds, harvesting mean reversion and controlling drift. In stress regimes, extended duration (EDV) and USD strength (UUP) often scale up defensiveness as equities de-risk.

• Tax and Liquidity Efficiency: Highly liquid ETFs support timely reallocations. Preference for 1940 Act funds and grantor trust structures (e.g., IAU, IBIT) and a no K-1 commodity wrapper (PDBC) streamlines reporting and helps manage after-tax returns.

• Transparency and Adaptability: The building-block approach makes changes visible and testable. If the macro map shifts—say, from disinflation to persistent inflation—commodity and real asset sleeves can be right-sized without redesigning the core.

Our model combines broad exposure to growth assets (VTI, VXUS), dividend income and inflation sensitivity (VNQ, VNQI), high-quality bonds for ballast (BND, BNDX) and convex downside protection (EDV), plus macro diversifiers—gold (IAU), commodities without the complexities of K-1 reporting (PDBC), and the U.S. dollar (UUP)—with a measured exposure to digital assets (IBIT). Each ETF is a purpose-built tool, and the discipline comes from sizing, rebalancing, and adapting to regimes—not prediction.

As always, this content is for educational purposes only and does not constitute investment advice.

Tomorrow, we will continue of series with a deep dive into the first ETF on our list, the Vanguard Total Stock Market ETF (VTI). Until then, be well and stay safe!