Gary Gordon Positions For 2012: Shunning Developed World Treasuries In Favor Of Emerging And Corporate Debt, MLPs

This is the 10th piece in our Positioning for 2012 series. Readers can find the entire Positioning For 2012 series here.

Gary A. Gordon, MS, CFP® is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. He has more than 22 years of experience as a personal coach in 'money matters,' including portfolio management, risk assessment, and small business development. Gary writes regular commentary at ETF Expert. He currently hosts the ETF Expert Show.

Seeking Alpha's Jonathan Liss recently spoke with Gary to find out how he planned to position clients in 2012 in light of his understanding of how a range of macro-economic and geopolitical trends were likely to unfold in the coming year.

Seeking Alpha (SA): How would you generally describe your investing style/philosophy?

Gary Gordon (GG): Successful investing is not about picking the next Apple (AAPL). It’s about what you can control. And the truth is, you don’t have a lot of control over the things (e.g., oil, interest rates, politics, corporate earnings, debt crises, etc.) that affect your investments.

Fortunately, one does have the power to determine every investment outcome. There are only 4: (a) big gain, (b) small gain, (c) small loss and (d) big loss. We primarily select ETFs for diversification, transparency and low cost, then employ a wide range of risk management tools (e.g., "stops," "hedges," "trend analysis," etc.) to minimize the possibility of the only thing that kills investors... the big loss.

SA: How many ETFs do you generally hold in a typical client portfolio? Do you use ETFs exclusively, or do you occasionally buy individual stocks, mutual funds, bonds or other investment vehicles? How do you measure portfolio risk?

GG: There are exceptions to every rule but we typically hold 14-16 positions in $500,000+ portfolios. When you consider the universe of potential non-correlating assets for optimal diversification, U.S. stocks and U.S. treasuries alone may not provide a desirable long-term result. We consider high yield bonds, convertibles, preferreds, REITs, MLPs, commodities and currencies – both foreign and domestic.

Our preferred vehicle is the exchange-traded fund, with its advantages in cost structure, transparency and 'trade-ability.' Yet diversifying one’s assets for non-correlation also requires diversification of “market access.” Individual issues correlate less with broader indexes than other indexes. The same tends to happened with actively managed mutual funds as opposed to using passively managed index funds exclusively. In other words, we will use all 3 types.

SA: Which asset classes are you overweight? Which are you underweight? Why?