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Beginner Help with Index Funds and ETFs
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Beginner Help with Index Funds and ETFs

  #11 (permalink)
Elite Member
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I really like and encourage ETF investment for the long run; and I highly recommend you check this website (ETF Database: The Original & Comprehensive Guide to ETFs) for an extensive Database.

My current portfolio for instance is shaped as follows:
55% allocated to stocks
40% allocated to bonds
5% in cash (foreign currencies) and acting as margin reserve for my futures day trading (but that's another topic)

In the stocks part, I have the following split:
40% large caps
30% medium caps
30% small caps

In the bonds part, I have this split:
60% gov bonds
40% corporate bonds

And finally, cash wise, I have equal amounts in these major currencies:
USD, EUR, JPY, GBP, CHF, AUD, CAD, HKD, NOK, SEK.

This is just to share an example of how you might want to approach portfolio management.
Use the database and scanning tools available on the website mentioned above to select your favorite ETF's.

You can find an ETF to every thing you wish to do, and avoid picking and selecting individual stocks.
Many ETFs have low fees too, and I prefer passive to actively managed ones.

I usually re-calibrate the portfolio every three months, or if I spot a serious imbalance in between. Plus given that trading is not really my unique and major source of income, I inject each month (very regularly) some cash into these ETFs or buy new ones.

All this is very personal, there is no single answer, no right or wrong, you have to experiment and try, and get lucky sometimes.
I cannot help on the 401k questions, I am not american, and never lived in the US. I don't know the system.
But usually, to reduce tax impact, I sell the losers or not so performing tickers for a smaller income tax, and replace them with new ETFS; while I maintain the big winners for a deferred income declaration; etc...

I used to have precious metals too in my portfolio, always through ETFs, but then replaced that with more stocks last year with gold dropping and S&P500 at very high returns. This is why I am at 55% stocks now, I was 15% in metals. I might go back now to adding gold again, don't know yet...

Hope I gave you some ideas to avoid 100% stocks portfolios; and maybe a hint or two on small/medium/large caps allocations.

Cheers
Fadi

Successful people will do what unsuccessful people won't or can't do!
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  #12 (permalink)
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It is easy to get in and allocate. When do you get out or cut exposure?

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  #13 (permalink)
Elite Member
Luxembourg
 
Futures Experience: Advanced
Platform: NinjaTrader
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Posts: 482 since Apr 2012
Thanks: 650 given, 625 received



solotrader View Post
It is easy to get in and allocate. When do you get out or cut exposure?

Hi there
A very valid question of course, and a tricky one to answer too.
Let me try and give you my view on this:

In my opinion, portfolio management is not really about cashing out, taking the money and running for holidays.
If you approach investment with this objective, you most probably fall in the short term trading category and in this case you need to apply the necessary money management rules and strategies - of which I had exposed by the way so many on this forum throughout the years, you can search for them.

Portfolio management shall fall in the spirit of long term wealth/asset management to primarily maintain your purchasing power by fighting inflation and mitigating overall geopolitical and financials threats.

In this perspective, one would virtually never get out of the market, but keeps rebalancing and re-allocating on a regular basis between the various asset classes following your understanding of the macro and micro economics; and most importantly the understanding of your very own personal and financial situation as it changes with time.

This gets even truer if you are managing your portfolio using passive ETFs that simply track asset classes, let's say bonds, metals or equities. The broader guidelines generally used in the business are to maintain your portfolio's balance of equities-to-bonds between min 25/75 in bear markets and max 75/25 in bull cycles.

Obviously, shall you hold a specific companies' stock you would at one point or another need to close the position if you spot a serious underperformance/threat in their organisation. (All businesses are cyclical in nature, but that's another topic)

By the way, I had for a long time increased and reduced exposure to bonds and equities in portfolio using technical analysis techniques: support and resistance levels, etc... applied to monthly charts of global ETFs like VTI and BND. But nowadays, I just go by the percentages and rebalance the portfolio when I see significant deviations from my target ratio.
Just for illustration purposes, in my example portfolio described in the previous comment, the ratio is nearly 55% equities 45% bonds, and it is a touch higher than the neutral 50/50 ratio

Successful people will do what unsuccessful people won't or can't do!
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  #14 (permalink)
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Good answers. Thanks.

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