Author Topic: If you were to buy 5-10 sector-specific ETFs today . . .  (Read 16098 times)

bermudasq

  • 5 O'Clock Shadow
  • *
  • Posts: 18
If you were to buy 5-10 sector-specific ETFs today . . .
« on: June 23, 2015, 08:07:46 AM »
I need to sell about $180k in stocks in the coming weeks (you're welcome tax-man) and I'd like to put much of the proceeds in sector-specific ETFs.  I already have my retirement accounts in low-fee Vanguard index funds.  I searched prior forum posts and didn't see much in the way of sector-specific recommendations. 

Currently I have access to the Vanguard ETFs, and any ETFs sold through Capital One/Sharebuilder.  I'd prefer more concentrated ETFs (under 50 positions) than the 400+ position Vanguard ETFs.

I'm thinking maybe biotech, pharma, financials, software, internet, consumables, healthcare, semiconductor, and/or media.  Probably not industrials, materials, telecommunications, or utilities.

I know past performance does not guarantee future returns, but any favorite ETFs around here?

Thanks!

(Reason for stock sale - In the near future, I'm starting a job in a 2,000+ attorney law firm.  Lots of attorneys equals lots of clients and adverse parties.  I don't want to be conflicted out of work matters and I also want to be 100% safe from insider trading allegations.  I'm donating my most-appreciated stock positions to lesson the tax burden.)

forummm

  • Walrus Stache
  • *******
  • Posts: 7355
  • Senior Mustachian
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #1 on: June 23, 2015, 08:43:31 AM »
If you just buy and hold VTI and VXUS is that really a conflict of interest? You'd own a pittance of any firm. And if any listed firm is suing another listed firm, either verdict would be fine, right?

I've got to believe that there's a common standard of practice here. Surely the entire legal industry isn't skipping index funds altogether?

forummm

  • Walrus Stache
  • *******
  • Posts: 7355
  • Senior Mustachian
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #2 on: June 23, 2015, 08:49:39 AM »
For simple math, if you bought 50% VTI and 50% VXUS, your single largest holding would be Apple, at 2% of your portfolio (<$4k). Is that amount enough for a conflict?

You could also buy extra portions of small and mid cap indexes to decrease the amount of the mega caps you own. So if you did 20%VTI 20%VB 20%VO 40%VXUS your single largest holding would be Apple, at 0.8% of your portfolio (<$1500). Is that amount enough for a conflict?

If you start buying sector ETFs, you are going to have much more dollar value of certain firms.

hodedofome

  • Handlebar Stache
  • *****
  • Posts: 1211
  • Age: 39
  • Location: Texas
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #3 on: June 23, 2015, 10:07:37 AM »
I could see someone equal weighting each available sector using SPDR or Vanguard ETFs (best expense ratios and very liquid) as this has historically (from ETF inception in 2000 to today) outperformed the total US stock index (possibly due to equal weighting or to rebalancing) by 5.8% vs 4.9% for VTI/VTSMX. But just cherry picking certain sectors while leaving others out doesn't make sense unless you know something the rest of us don't. I would just hold all the sector ETFs in equal weight, or do a total stock index like forummm says.

sol

  • Walrus Stache
  • *******
  • Posts: 8437
  • Age: 42
  • Location: Pacific Northwest
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #4 on: June 23, 2015, 10:51:50 AM »
Generally speaking, owning whole market index funds will be equivalent and is sufficient to shield you from conflict of interest allegations.  I'm my case, I'm barred from owning lots of individual stocks and some sector-specific indices, but whole market indices are fine. 
« Last Edit: June 23, 2015, 12:03:08 PM by sol »

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #5 on: June 23, 2015, 11:41:21 AM »
If you want to pursue a quantitative strategy then you could consider dual momentum sector rotation as described in Gary Antonacci's Dual Momentum investing.

I wouldn't recommend it in a taxable account though.

I would echo others here and keep it simple with broad low cost index funds like VT, and VTI.

bermudasq

  • 5 O'Clock Shadow
  • *
  • Posts: 18
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #6 on: June 23, 2015, 11:53:05 AM »
Thanks for responses.  I apologize for my unclear email - I'm not selling any of my vanguard indexes.  I'm keeping the retirement accounts as is.  I'm selling all my individual stocks in Capital One/Sharebuilder.

bermudasq

  • 5 O'Clock Shadow
  • *
  • Posts: 18
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #7 on: June 23, 2015, 11:57:01 AM »
But just cherry picking certain sectors while leaving others out doesn't make sense unless you know something the rest of us don't. I would just hold all the sector ETFs in equal weight, or do a total stock index like forummm says.

My reasoning for cherry-picking is that I want to retain some of the industry exposure I've had in the stocks I'm selling.  Avoiding industrials and materials, because those do well when the global economy is growing strongly.  Telecommunications are too volatile for me - too much of competition.  And, I'm too young for utilities :)

forummm

  • Walrus Stache
  • *******
  • Posts: 7355
  • Senior Mustachian
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #8 on: June 23, 2015, 12:00:46 PM »
If you want to pursue a quantitative strategy then you could consider dual momentum sector rotation as described in Gary Antonacci's Dual Momentum investing.

I wouldn't recommend it in a taxable account though.

I would echo others here and keep it simple with broad low cost index funds like VT, and VTI.

It seems that sector rotation would potentially open OP up to the conflict of interest problems he's setting out to avoid. Buy-and-hold of the whole market would remove those issues that may arise from trading or concentrating even temporarily in one sector or another.

But just cherry picking certain sectors while leaving others out doesn't make sense unless you know something the rest of us don't. I would just hold all the sector ETFs in equal weight, or do a total stock index like forummm says.

My reasoning for cherry-picking is that I want to retain some of the industry exposure I've had in the stocks I'm selling.  Avoiding industrials and materials, because those do well when the global economy is growing strongly.  Telecommunications are too volatile for me - too much of competition.  And, I'm too young for utilities :)

I think this kind of sector selection, especially for the reasons you mention, is unlikely to serve you well.

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #9 on: June 23, 2015, 12:08:31 PM »

If you want to pursue a quantitative strategy then you could consider dual momentum sector rotation as described in Gary Antonacci's Dual Momentum investing.

I wouldn't recommend it in a taxable account though.

I would echo others here and keep it simple with broad low cost index funds like VT, and VTI.

It seems that sector rotation would potentially open OP up to the conflict of interest problems he's setting out to avoid. Buy-and-hold of the whole market would remove those issues that may arise from trading or concentrating even temporarily in one sector or another.

But just cherry picking certain sectors while leaving others out doesn't make sense unless you know something the rest of us don't. I would just hold all the sector ETFs in equal weight, or do a total stock index like forummm says.

My reasoning for cherry-picking is that I want to retain some of the industry exposure I've had in the stocks I'm selling.  Avoiding industrials and materials, because those do well when the global economy is growing strongly.  Telecommunications are too volatile for me - too much of competition.  And, I'm too young for utilities :)

I think this kind of sector selection, especially for the reasons you mention, is unlikely to serve you well.

Its very unlikely that owning a sector specific index fund would open him up to conflict of interest problems. That's a stretch to say the least.

But I agree that haphazardly picking sectors in order to maintain industry exposures is unlikely to bring additional returns and is likely to bring additional costs.

hodedofome

  • Handlebar Stache
  • *****
  • Posts: 1211
  • Age: 39
  • Location: Texas
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #10 on: June 23, 2015, 12:19:41 PM »

But just cherry picking certain sectors while leaving others out doesn't make sense unless you know something the rest of us don't. I would just hold all the sector ETFs in equal weight, or do a total stock index like forummm says.

My reasoning for cherry-picking is that I want to retain some of the industry exposure I've had in the stocks I'm selling.  Avoiding industrials and materials, because those do well when the global economy is growing strongly.  Telecommunications are too volatile for me - too much of competition.  And, I'm too young for utilities :)

How do you know the global economy will not be strong in the future?

forummm

  • Walrus Stache
  • *******
  • Posts: 7355
  • Senior Mustachian
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #11 on: June 23, 2015, 12:20:41 PM »

If you want to pursue a quantitative strategy then you could consider dual momentum sector rotation as described in Gary Antonacci's Dual Momentum investing.

I wouldn't recommend it in a taxable account though.

I would echo others here and keep it simple with broad low cost index funds like VT, and VTI.

It seems that sector rotation would potentially open OP up to the conflict of interest problems he's setting out to avoid. Buy-and-hold of the whole market would remove those issues that may arise from trading or concentrating even temporarily in one sector or another.

But just cherry picking certain sectors while leaving others out doesn't make sense unless you know something the rest of us don't. I would just hold all the sector ETFs in equal weight, or do a total stock index like forummm says.

My reasoning for cherry-picking is that I want to retain some of the industry exposure I've had in the stocks I'm selling.  Avoiding industrials and materials, because those do well when the global economy is growing strongly.  Telecommunications are too volatile for me - too much of competition.  And, I'm too young for utilities :)

I think this kind of sector selection, especially for the reasons you mention, is unlikely to serve you well.

Its very unlikely that owning a sector specific index fund would open him up to conflict of interest problems. That's a stretch to say the least.

But I agree that haphazardly picking sectors in order to maintain industry exposures is unlikely to bring additional returns and is likely to bring additional costs.

The scenario I was thinking is that the rotation strategy you recommended could play out like this:
OP's signals tell him to sell X and buy Y.
Coincidentally the next day he's assigned to some cases involving a big firm in X suing a big firm in Y.

It just could end up looking funny. Maybe that's a problem, maybe not. But that was OP's original reason for liquidating old portfolio.

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #12 on: June 23, 2015, 12:42:34 PM »


If you want to pursue a quantitative strategy then you could consider dual momentum sector rotation as described in Gary Antonacci's Dual Momentum investing.

I wouldn't recommend it in a taxable account though.

I would echo others here and keep it simple with broad low cost index funds like VT, and VTI.

It seems that sector rotation would potentially open OP up to the conflict of interest problems he's setting out to avoid. Buy-and-hold of the whole market would remove those issues that may arise from trading or concentrating even temporarily in one sector or another.

But just cherry picking certain sectors while leaving others out doesn't make sense unless you know something the rest of us don't. I would just hold all the sector ETFs in equal weight, or do a total stock index like forummm says.

My reasoning for cherry-picking is that I want to retain some of the industry exposure I've had in the stocks I'm selling.  Avoiding industrials and materials, because those do well when the global economy is growing strongly.  Telecommunications are too volatile for me - too much of competition.  And, I'm too young for utilities :)

I think this kind of sector selection, especially for the reasons you mention, is unlikely to serve you well.

Its very unlikely that owning a sector specific index fund would open him up to conflict of interest problems. That's a stretch to say the least.

But I agree that haphazardly picking sectors in order to maintain industry exposures is unlikely to bring additional returns and is likely to bring additional costs.

The scenario I was thinking is that the rotation strategy you recommended could play out like this:
OP's signals tell him to sell X and buy Y.
Coincidentally the next day he's assigned to some cases involving a big firm in X suing a big firm in Y.

It just could end up looking funny. Maybe that's a problem, maybe not. But that was OP's original reason for liquidating old portfolio.

Buying a sector ETF and buying a firm are in no way equivalent.

Although a sector ETF may contain his client's firm, it will also contain his clients competitor's firms.

nobodyspecial

  • Handlebar Stache
  • *****
  • Posts: 1469
  • Location: Land above the land of the free
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #13 on: June 23, 2015, 12:51:28 PM »
Quote
Buying a sector ETF and buying a firm are in no way equivalent.
Although a sector ETF may contain his client's firm, it will also contain his clients competitor's firms.
Could still be a conflict though.
A client firm in sector hires them because there is going to be a big anti-trust / monopolies / whatever, case that is going to effect the whole sector.
He dumps that sector - still looks like insider trading.


bermudasq

  • 5 O'Clock Shadow
  • *
  • Posts: 18
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #14 on: June 23, 2015, 01:01:02 PM »
Thanks again for all replies.  I have benefited immensely your guys' writings in this and other posts.  If you (or others not yet present) could please excuse my perhaps unusual (or foolish) risk tolerances and investing goals, I'd still greatly appreciate any recommended ETFs from those in this forum who do go down the sector-specific path.  I'm still interested in these ETFs for the same reasons that I've done so much individual stock picking.  My stock picking results have greatly exceeded the performance of my Vanguard admiral index funds.  Could be dumb luck, but I'm still looking to continue my concentration in certain industries.

As an example, I own Apple through the following in my retirement accounts (which are staying as is):

Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
Vanguard 500 Index Fund Admiral Shares (VFIAX)
Vanguard Wellington Fund Admiral Shares (VWENX)

But, the actual amount of Apple exposure in these is small.  I donated a lot of Apple stock (up 135%) to avoid capital gains, and now I want to buy a tech ETF to get that exposure back, without buying more Apple stock.  I could buy Vanguard Information Technology ETF (VGT), but I was curious if those on this forum preferred other ETFs in that sector.  Without listing each of the 25 or so stocks I'm selling, I have the same goals for these other sectors.

I see from a subsequent post that there might still be possible conflicts of interest.  Fascinating - I'll have to give that some more thought. 

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #15 on: June 23, 2015, 01:06:38 PM »
Quote
Buying a sector ETF and buying a firm are in no way equivalent.
Although a sector ETF may contain his client's firm, it will also contain his clients competitor's firms.
Could still be a conflict though.
A client firm in sector hires them because there is going to be a big anti-trust / monopolies / whatever, case that is going to effect the whole sector.
He dumps that sector - still looks like insider trading.

This is so far-fetched as to be laughable, particularly if he is trading based on a system such as dual momentum which uses publicly available price information.
« Last Edit: June 23, 2015, 01:27:27 PM by milesdividendmd »

forummm

  • Walrus Stache
  • *******
  • Posts: 7355
  • Senior Mustachian
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #16 on: June 23, 2015, 01:20:27 PM »
Not to repeat myself, but I've got to believe that there's a common standard of practice for the legal profession. Perhaps the OP should just consult his new firm about a safe investment practice instead of having people speculate for him on the Internet.

bermudasq

  • 5 O'Clock Shadow
  • *
  • Posts: 18
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #17 on: June 23, 2015, 01:49:11 PM »
Not to repeat myself, but I've got to believe that there's a common standard of practice for the legal profession. Perhaps the OP should just consult his new firm about a safe investment practice instead of having people speculate for him on the Internet.

Indeed, my inquiry is not a conflict of interest inquiry.  No need to speculate on my conflict of interest risk, though I have found the discussion interesting.  Additionally, any concerns are likely obviated by my buy and hold tendencies.  It may be of interest to some, but the common standard of practice that I've observed is that those in the legal profession are too far in debt to do any investing.  It is due to my MMM ways that I was able to pay back my loans in short order and start my investing journey.

mrpercentage

  • Handlebar Stache
  • *****
  • Posts: 1236
  • Location: PHX, AZ
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #18 on: June 23, 2015, 02:30:04 PM »
If I had to pick sectors it would be
50% XLY
50% XLV



bermudasq

  • 5 O'Clock Shadow
  • *
  • Posts: 18
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #19 on: June 23, 2015, 02:55:40 PM »
If I had to pick sectors it would be
50% XLY
50% XLV

Thanks a lot!  Just did a quick review, but those seem to be what I'm looking for.  I may still dabble in Vanguard Information Technology ETF (VGT) as well, unless I get a good alternative recommendation for that sector.  Even though VGT has almost 400 positions, 55% of the portfolio is concentrated in these stocks:

 1   Apple Inc.
 2   Microsoft Corp.
 3   Google Inc.
 4   Intel Corp.
 5   Facebook Inc.
 6   International Business Machines Corp.
 7   Oracle Corp.
 8   Cisco Systems Inc.
 9   Visa Inc.
 10   QUALCOMM Inc.

 So, still concentrated in positions I'm interested in (particularly Apple). 

dungoofed

  • Pencil Stache
  • ****
  • Posts: 661
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #20 on: June 23, 2015, 04:26:49 PM »
Agree with forummm - ask your company to clarify their requriements. I've worked at companies that required you to liquidate (single stock) positions before starting, others that didn't care what you hold before you join the firm, others that the moment they bring on a new client require everyone to disclose and/or liquidate (single stock), and others that require you to place all trades via the firm after an application process and a wait of approximately 2-3 weeks.

bermudasq

  • 5 O'Clock Shadow
  • *
  • Posts: 18
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #21 on: June 24, 2015, 07:17:33 AM »
Agree with forummm - ask your company to clarify their requriements. I've worked at companies that required you to liquidate (single stock) positions before starting, others that didn't care what you hold before you join the firm, others that the moment they bring on a new client require everyone to disclose and/or liquidate (single stock), and others that require you to place all trades via the firm after an application process and a wait of approximately 2-3 weeks.

Thanks.  As I mentioned, I'm not primarily concerned about conflicts because of the preemptive actions described above.  I plan to sell all my stock positions before I start.  Then, if the firm asks, I'll be happy to disclose that I am invested in only certain specified index funds and ETFs.  To this point I have received only one ETF suggestion post, leading me to believe this in not the right forum to ask my question.  That is not to dismiss the other wealth of knowledge contained on this forum.

dungoofed

  • Pencil Stache
  • ****
  • Posts: 661
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #22 on: June 24, 2015, 07:26:06 AM »
Hm you might have some more luck on a ETF-picker's forum (if such a thing exist).

bermudasq

  • 5 O'Clock Shadow
  • *
  • Posts: 18
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #23 on: June 24, 2015, 07:43:12 AM »
Hm you might have some more luck on a ETF-picker's forum (if such a thing exist).

Indeed.  My reasons for picking this forum are simply that this is the only forum I frequent, and that I find much helpful information and wisdom in the Investor Alley sub-forum.

Aphalite

  • Bristles
  • ***
  • Posts: 425
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #24 on: June 24, 2015, 10:31:00 AM »
Historically, consumer staples, energy, and healthcare are the sectors that reward investors the most - the vanguard ETFs are VDC, VDE, and VHT

For the most part (unique company cases certainly exist) consumer discretionary is at the whims of overal economic health, industrials/materials/telecom requires too much free cash reinvestment to be good investments, tech is prone to overvaluation, and financials always have the chance of complete collapse (the way to juice shareholder return in financials is to lever up). Staples, energy, and healthcare are normally the safest and produce the most free cash for either shareholder distribution or company reinvestment

Energy is probably the cheapest right now (as a result, 10 year returns have decreased quite a bit over where it was last year), but be aware that all three (as well as the general market) could fall if interest rates rise due to P/E compression
https://personal.vanguard.com/us/funds/etf/all?assetclass=ss&assetclass=ss

PS: If you can find a way to hold a tobacco ETF - that would probably give you the best long term returns of them all - those stocks are constantly undervalued because of regulatory concerns, a dying customer base, and general health awareness, but the relatively high dividend + reinvestment into a depressed P/E gives you higher than normal returns
« Last Edit: June 24, 2015, 10:34:14 AM by Aphalite »

Eric

  • Magnum Stache
  • ******
  • Posts: 4058
  • Location: On my bike
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #25 on: June 24, 2015, 10:49:13 AM »
To this point I have received only one ETF suggestion post, leading me to believe this in not the right forum to ask my question. 

So you just want us to guess on what sectors will return the most money?  Hold on, let me get out my dart board and trained monkeys.

Scandium

  • Handlebar Stache
  • *****
  • Posts: 2198
  • Location: EastCoast
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #26 on: June 24, 2015, 10:49:49 AM »
I donated a lot of Apple stock (up 135%) to avoid capital gains, and now I want to buy a tech ETF to get that exposure back, without buying more Apple stock.  I could buy Vanguard Information Technology ETF (VGT), but I was curious if those on this forum preferred other ETFs in that sector.  Without listing each of the 25 or so stocks I'm selling, I have the same goals for these other sectors.

Why do you want more exposure to Apple? What's the rationale behind this?
« Last Edit: June 24, 2015, 10:55:02 AM by Scandium »

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #27 on: June 24, 2015, 12:03:21 PM »
Keep your Apple unless you can't.

If you believe in the company then investing in tech at large is a great example of "deworsification."

bermudasq

  • 5 O'Clock Shadow
  • *
  • Posts: 18
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #28 on: June 24, 2015, 01:05:30 PM »
So you just want us to guess on what sectors will return the most money?  Hold on, let me get out my dart board and trained monkeys.

Not at all.  I am looking for recommended ETFs in the listed sectors.  My inquiry seems to have touched some sort of forum-nerve.  Seemed innocent enough when I raised it. 

bermudasq

  • 5 O'Clock Shadow
  • *
  • Posts: 18
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #29 on: June 24, 2015, 01:16:53 PM »
Historically, consumer staples, energy, and healthcare are the sectors that reward investors the most - the vanguard ETFs are VDC, VDE, and VHT

For the most part (unique company cases certainly exist) consumer discretionary is at the whims of overal economic health, industrials/materials/telecom requires too much free cash reinvestment to be good investments, tech is prone to overvaluation, and financials always have the chance of complete collapse (the way to juice shareholder return in financials is to lever up). Staples, energy, and healthcare are normally the safest and produce the most free cash for either shareholder distribution or company reinvestment

Energy is probably the cheapest right now (as a result, 10 year returns have decreased quite a bit over where it was last year), but be aware that all three (as well as the general market) could fall if interest rates rise due to P/E compression
https://personal.vanguard.com/us/funds/etf/all?assetclass=ss&assetclass=ss

PS: If you can find a way to hold a tobacco ETF - that would probably give you the best long term returns of them all - those stocks are constantly undervalued because of regulatory concerns, a dying customer base, and general health awareness, but the relatively high dividend + reinvestment into a depressed P/E gives you higher than normal returns

Thank you very much for your comments and links.

hodedofome

  • Handlebar Stache
  • *****
  • Posts: 1211
  • Age: 39
  • Location: Texas
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #30 on: June 24, 2015, 02:42:35 PM »
Not at all.  I am looking for recommended ETFs in the listed sectors.  My inquiry seems to have touched some sort of forum-nerve.  Seemed innocent enough when I raised it.

It's because none of us can tell you with any certainty what sectors of the market are going to do the best over the next 20-30+ years. In fact no-one can. You have to decrease your timeframe by a lot, and do a bunch of analysis to make a calculated bet (with a lot of variables) over the next 2-5 years. Anyone giving buy/hold/sell recommendations past 5 years out is delusional. Anything can happen over that timeframe.

bdbrooks

  • 5 O'Clock Shadow
  • *
  • Posts: 62
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #31 on: June 25, 2015, 07:06:07 AM »
A couple of thoughts...

  • Buying sectors in a NON systematic approach is a great way to lose money (http://www.businessinsider.com/typical-investor-returns-20-years-2014-8)
  • Buying sectors in a systematic approach in a taxable account is probably a great way to end up paying taxes (depending on your system)
  • Buying an ETF that will systematically buy or sell sectors is a great way to get around both of those previous points (and certainly leaves you clear from insider trading speculation).

Here are a few ETFs to look into
  • CAPE Based off the Cape Shiller Index. (I am going for memory on how they select sectors so do your own research if interested) They first screen for the 5 cheapest sectors using the Cape Shiller Index. Then they get rid of the one with the worst momentum and invest in the other 4. It has beat the market every year since inception (only about 2.5 years ago). To me their system makes sense which helps me get past only 2.5 years of history. .45% ER
  • FV This is a momentum sector rotation ETF. It will invest in the 5 sectors with the best momentum according to the Point and Figure method. It has only been out for a little over a year, but it's performance has been blazing (about double the SP500). There is plenty of research showing the robustness of momentum (both within cross section of stocks and cross section of sectors). I personally invest in this ETF. The only downside is the expense ratio (.94% but momentum has historically added closer to 3-4% in premium). If the ER is too high for you, that is reasonable and this next one may be the best fit if you are hyper paranoid about ER.
  • MTUM It is a momentum ETF. It has an ER of .15%. It invests in the stocks with the best momentum (so this is NOT a sector rotation etf). It is currently invested in 126 stocks. I know you said you prefered 50 or so stocks. The top 50 stocks make up just under 80% of the weight. It has only been out a couple of years. If you want to see more history of a very similar ETF look at PDP. PDP has been out much longer, but is more expensive.

Let me know if you have any questions. (I am ready for backlash of people screaming about how you can't beat the market so you have to get the cheapest fund).

bermudasq

  • 5 O'Clock Shadow
  • *
  • Posts: 18
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #32 on: June 25, 2015, 07:58:52 AM »
A couple of thoughts...

Very helpful.  Thanks a lot. I'll look into those ETFs. 

The 'Monkeys Pick Stocks' Eric posted said "most investors should choose index funds."  The Business Insider article you linked to said: "Most people are just terrible at investing."  This may certainly be true, but in a few select areas, I might not be in the "most people" category.

If I didn't have this job coming up, I would keep all $180k in individual stocks (this is about half of my net worth).  I would have left a lot of money on the table in prior years if I had kept the money in Vanguard index funds (like my retirement accounts). 

Business Insider says: "One big problem is that investors often find themselves buying at highs and selling at lows, especially when volatility picks up and patience is tested." My investing success has come from picking great companies and never selling at a loss.  Often (maybe 50% of the time), after I buy a stock, the price falls.  Then I buy more.  If the stock price keeps dropping, I keep buying.  I then sell down to a 5% position when the stock returns to black.  I may have to repeat this process a few times for some stocks, but overall, this has worked really well for me.  I currently have 5 stocks in the red, but the paper losses are far outweighed by the paper gains in my other 22 stocks.  This is in addition to my many realized gains and no realized losses.  I also happen to really enjoy investing.

I don't think I'd keep much more than $200k in individual stocks.  I need to be in a position to 'double down' without having to sell other stocks at inopportune times, and that only works when my initial investments are small compared to my paycheck.  So, there's more context in case anyone cares.  Not everyone has the same investing/retirement goals or risk tolerances.

I'm new to ETFs, so I'm still in gathering information.

Scandium

  • Handlebar Stache
  • *****
  • Posts: 2198
  • Location: EastCoast
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #33 on: June 25, 2015, 08:06:49 AM »
A couple of thoughts...

Here are a few ETFs to look into

Let me know if you have any questions. (I am ready for backlash of people screaming about how you can't beat the market so you have to get the cheapest fund).

I guess I'll be that guy..
These really sound like some serious market timing nonsense! Always amazed what those marketing people come up with. No wonder there are more mutual funds that stocks in existence.

But hey, if you want to pay 9 times the expenses of an index knock yourself out. I really don't care, and take no personal offense whatever you do. Actually I find reading about these "fool proof" market beating strategies pretty hilarious so keep 'em coming!

And since OP is above average per his own admission, and I'm decidedly average myself, I'm afraid I can't help anyway.

Aphalite

  • Bristles
  • ***
  • Posts: 425
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #34 on: June 25, 2015, 08:40:44 AM »
I'd be careful with the momentum ETFs - they're popular right now because we're in a long bull market, if one sector falls, there's always another sector that's rising. Unless if there's a trigger to hold cash when markets are falling rapidly, you're going to be switching between losers on a bear, and then you'll miss the initial pop when equities start rising again (momentum uses a lookback period). I think my main qualm with momentum is that you're constantly chasing returns - and we all know past performance does not predict the future. Momentum is more of a play on the psychology of other investors than actual intrinsic company value - but I guess you can also debate which force is more powerful - investor irrationality or intrinsic company value

Consider this passage from Peter Lynch's One Up on Wall Street (which is about stock picking not indexing during the last great bull run we had in the late 90s):
"If you put $100,000 in stocks on July 1, 1994, and stayed fully invested for five years, your $100,000 grew into $341,722. But if you were out of stocks for just thirty days over that stretch—the thirty days when stocks had their biggest gains—your $100,000 turned into a disappointing $153,792. By staying in the market, you more than doubled your reward."

See this link also - 33% of wealth would be gone since 1926 if you take away the best 100 days (out of 30,000+): http://theconservativeincomeinvestor.com/2013/06/06/stop-market-timing-and-start-dividend-investing/

P.S. bdbrooks, can you explain this:
"Buying sectors in a systematic approach in a taxable account is probably a great way to end up paying taxes (depending on your system)
Buying an ETF that will systematically buy or sell sectors is a great way to get around both of those previous points (and certainly leaves you clear from insider trading speculation)."

point #1 is only true if you're selling as part of your systematic approach or if you're buying a high turnover ETF - there's no tax consequences when you buy and hold
point #2 is not true - turnover in ETF generates tax consequences, whether through tax loss or through capital gains (unless you're swapping for like kind ETFs, which wouldn't be the case in a momentum fund) - you end up paying the bill at the end of the year, or, more likely, as a reduction on your actual return
« Last Edit: June 25, 2015, 08:50:59 AM by Aphalite »

bermudasq

  • 5 O'Clock Shadow
  • *
  • Posts: 18
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #35 on: June 25, 2015, 08:59:51 AM »
And since OP is above average per his own admission, and I'm decidedly average myself, I'm afraid I can't help anyway.

There doesn't seem to be much backlash in the 'Share Your Badassity' sub-forum.  I also have no reason to doubt those in the 'Throw Down the Gauntlet' sub-forum claiming to run x miles a day, or swing a kettleball x number of times, even though "most people" can't do those things.

I am genuinely surprised that I've had more responses from those who took the time to say they couldn't/wouldn't help than posts from those offering their own experiences/views on ETFs.

hodedofome

  • Handlebar Stache
  • *****
  • Posts: 1211
  • Age: 39
  • Location: Texas
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #36 on: June 25, 2015, 09:22:59 AM »
Consider this passage from Peter Lynch's One Up on Wall Street (which is about stock picking not indexing during the last great bull run we had in the late 90s):
"If you put $100,000 in stocks on July 1, 1994, and stayed fully invested for five years, your $100,000 grew into $341,722. But if you were out of stocks for just thirty days over that stretch—the thirty days when stocks had their biggest gains—your $100,000 turned into a disappointing $153,792. By staying in the market, you more than doubled your reward."

See this link also - 33% of wealth would be gone since 1926 if you take away the best 100 days (out of 30,000+): http://theconservativeincomeinvestor.com/2013/06/06/stop-market-timing-and-start-dividend-investing/

People throw this stat around but they don't mention the inverse - what if you missed the 100 worst days? From 1928 to 2010, if you missed the best 1% of all days your return gets crushed from 4.86% down to -7.08% per annum. However, the converse is true, if you miss the worst 1% of returns your returns explode to 19.09% a year. And take special note that if you miss both the best and worst 1% of days your return is higher than buy and hold. Source:

https://drive.google.com/file/d/0BzyyTlvGE-T2WUpTcThDVzlWeEE/view?usp=sharing

point #2 is not true - turnover in ETF generates tax consequences, whether through tax loss or through capital gains (unless you're swapping for like kind ETFs, which wouldn't be the case in a momentum fund) - you end up paying the bill at the end of the year, or, more likely, as a reduction on your actual return

It depends on how the ETF is structured. ETFs can have turnover and cause no taxable events for investors if they do it right. http://www.etf.com/etf-education-center/21017-why-are-etfs-transparent-and-tax-efficient.html
http://mebfaber.com/2011/04/29/active-etfs-just-the-beginning/

bdbrooks

  • 5 O'Clock Shadow
  • *
  • Posts: 62
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #37 on: June 25, 2015, 09:29:25 AM »
A couple of thoughts...

Here are a few ETFs to look into

Let me know if you have any questions. (I am ready for backlash of people screaming about how you can't beat the market so you have to get the cheapest fund).

I guess I'll be that guy..
These really sound like some serious market timing nonsense! Always amazed what those marketing people come up with. No wonder there are more mutual funds that stocks in existence.

But hey, if you want to pay 9 times the expenses of an index knock yourself out. I really don't care, and take no personal offense whatever you do. Actually I find reading about these "fool proof" market beating strategies pretty hilarious so keep 'em coming!

And since OP is above average per his own admission, and I'm decidedly average myself, I'm afraid I can't help anyway.

First off, most people don't realize this, but Mr Bogle thinks that active management can make sense. He does think that it has to be done in a low cost manner, and he thinks you shouldn't go for the cheapest fund because it is the cheapest fund. (http://www.cnbc.com/id/102688265). It still needs to lowish in fees. There is no excuses for disconnecting your brain cells and getting a mutual fund paying 2% a year in fees.

Secondly, why do people that believe in passive management also believe that any deviation from a market cap weighted index is incredibly foolish? http://www.followingthetrend.com/2015/06/a-random-ass-kicking-of-wall-street/ Here he talks about how ridiculous this assumption is. He also shows how just changing how portfolios are weighted can have a huge impact on the returns.

Now if you are asking, "Aren't the momentum and sector rotation etfs different because they are actually choosing which to own and which to not own?" That is a fair and true point. However, momentum has been well documented to work over incredibly long timeframes (including out of sample tests) and across several asset classes (bonds, currencies, futures, commodities). Now these strategies are invested 100% of the time. Most issues with market timing involves jumping in and out of the market at the wrong times. This will not have that issue. It will be jumping in and out of sectors/stocks and there is risk there, but to call it market timing is a bit misguided (I would call it both systematic investing and active management but not market timing). If you are questioning whether momentum (or value investing for that matter) actually works then you haven't looked at the research with an open mind. If you don't want to do the research and look for ways to get a slight edge in the market, then that is fine. Your approach is reasonable. However, so is mine.

Furthermore, I didn't say this was "fool proof" (at least that I can find), and I am not saying that these strategies will beat the market every year. Some years they will lag, but momentum has generally outperformed even on a risk adjusted basis (http://blog.alphaarchitect.com/2015/03/26/the-best-way-to-combine-value-and-momentum-investing-strategies/). They are generally more volatile, but they have higher sharpe ratios and sortino ratios than their market cap weighted brethren.

Also, these are ETFs not mutual funds. The tax structure of a mutual fund would render these strategies useless if they were done inside of a mutual fund.

Furthermore, is .15% really that expensive for a strategy that has historically beat the market (over long enough time frames (should I really have to say that, no strategy ever beats the market every year, but if I don't put in this qualifier then people start interpreting it as "fool proof", rant over))?

hodedofome

  • Handlebar Stache
  • *****
  • Posts: 1211
  • Age: 39
  • Location: Texas
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #38 on: June 25, 2015, 09:38:31 AM »
And since OP is above average per his own admission, and I'm decidedly average myself, I'm afraid I can't help anyway.

There doesn't seem to be much backlash in the 'Share Your Badassity' sub-forum.  I also have no reason to doubt those in the 'Throw Down the Gauntlet' sub-forum claiming to run x miles a day, or swing a kettleball x number of times, even though "most people" can't do those things.

I am genuinely surprised that I've had more responses from those who took the time to say they couldn't/wouldn't help than posts from those offering their own experiences/views on ETFs.

Look, I'm an active trader/investor but it's all I do with my free time. I've put in thousands of hours of deliberate practice, read over 50 books, have at least 100 on my shelf I need to get to, and I daily follow about 100 trading/investing blogs. It would be hard for me to believe that someone could beat the market, apart from luck, from just making active investing a small hobby. It's hard, really hard. Making calculated predictions about the future takes a lot of work, for someone to just whilly nilly do it based on a gut feeling is pure luck. You can say you're just doing the Peter Lynch strategy of buying what you know, but if your research strategy was simply "I like the product, I'll buy the stock" that's not a good one. Lynch was much more sophisticated than that, and had the biggest bull market in history to provide a huge wind in his sails. There's position sizing and exit strategy which amateur investors don't understand but is vital for long term success. Do you understand the risks of your martingale strategy? If you buy a stock, and it goes down, you keep buying. What if you're wrong? What if it permanently stays depressed or goes to $0? At what point do you admit you are wrong? You need to know this in advance and calculate the probability of a risk of ruin so that you determine if you have a positive expectancy or not. If you haven't done this already, then I'm confident your past performance is mostly due to luck and you have no idea the risks you are taking to get your returns.

I'm not trying to be a jerk here, I encourage anyone who wants to get into active investing to go for it, as long as they know the risks ahead of time. Everyone told me I was stupid for trying but thankfully I didn't listen to them. But I started off really small and only increased my positions as I made money in my trading account. My hard earned savings were never at serious risk... But I had a ton to learn before my profits could be attributed more to skill than to luck.
« Last Edit: June 25, 2015, 09:50:13 AM by hodedofome »

hodedofome

  • Handlebar Stache
  • *****
  • Posts: 1211
  • Age: 39
  • Location: Texas
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #39 on: June 25, 2015, 09:43:08 AM »
First off, most people don't realize this, but Mr Bogle thinks that active management can make sense. He does think that it has to be done in a low cost manner, and he thinks you shouldn't go for the cheapest fund because it is the cheapest fund. (http://www.cnbc.com/id/102688265). It still needs to lowish in fees. There is no excuses for disconnecting your brain cells and getting a mutual fund paying 2% a year in fees.

Secondly, why do people that believe in passive management also believe that any deviation from a market cap weighted index is incredibly foolish? http://www.followingthetrend.com/2015/06/a-random-ass-kicking-of-wall-street/ Here he talks about how ridiculous this assumption is. He also shows how just changing how portfolios are weighted can have a huge impact on the returns.

Now if you are asking, "Aren't the momentum and sector rotation etfs different because they are actually choosing which to own and which to not own?" That is a fair and true point. However, momentum has been well documented to work over incredibly long timeframes (including out of sample tests) and across several asset classes (bonds, currencies, futures, commodities). Now these strategies are invested 100% of the time. Most issues with market timing involves jumping in and out of the market at the wrong times. This will not have that issue. It will be jumping in and out of sectors/stocks and there is risk there, but to call it market timing is a bit misguided (I would call it both systematic investing and active management but not market timing). If you are questioning whether momentum (or value investing for that matter) actually works then you haven't looked at the research with an open mind. If you don't want to do the research and look for ways to get a slight edge in the market, then that is fine. Your approach is reasonable. However, so is mine.

Furthermore, I didn't say this was "fool proof" (at least that I can find), and I am not saying that these strategies will beat the market every year. Some years they will lag, but momentum has generally outperformed even on a risk adjusted basis (http://blog.alphaarchitect.com/2015/03/26/the-best-way-to-combine-value-and-momentum-investing-strategies/). They are generally more volatile, but they have higher sharpe ratios and sortino ratios than their market cap weighted brethren.

Also, these are ETFs not mutual funds. The tax structure of a mutual fund would render these strategies useless if they were done inside of a mutual fund.

Furthermore, is .15% really that expensive for a strategy that has historically beat the market (over long enough time frames (should I really have to say that, no strategy ever beats the market every year, but if I don't put in this qualifier then people start interpreting it as "fool proof", rant over))?

bdbrooks while I generally agree with what you're saying, the individual stock momentum funds aren't all they are cracked up to be. They are generally too diversified, when only a concentrated fund will have a chance at outsized performance. http://www.dualmomentum.net/2014/11/individual-stock-momentum-that-dog-dont.html

bdbrooks

  • 5 O'Clock Shadow
  • *
  • Posts: 62
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #40 on: June 25, 2015, 09:48:14 AM »
P.S. bdbrooks, can you explain this:
"Buying sectors in a systematic approach in a taxable account is probably a great way to end up paying taxes (depending on your system)
Buying an ETF that will systematically buy or sell sectors is a great way to get around both of those previous points (and certainly leaves you clear from insider trading speculation)."

point #1 is only true if you're selling as part of your systematic approach or if you're buying a high turnover ETF - there's no tax consequences when you buy and hold
point #2 is not true - turnover in ETF generates tax consequences, whether through tax loss or through capital gains (unless you're swapping for like kind ETFs, which wouldn't be the case in a momentum fund) - you end up paying the bill at the end of the year, or, more likely, as a reduction on your actual return

#1 He was talking about buying certain sectors. My interpretation of that he was going to do a sector rotation strategy and not a buy and hold. Part of my assumption was that if you are going to buy and hold the sector for the long haul why not own a broad market index, because there will be sector crashes and if you aren't going to be selling them or rebalancing (selling the winners) then you will get things like real estate in 2006-2009, financials in 2008, and energy in 2014. With his recent comments it seems like he might not be looking at that kind of strategy. However, that is why I put a qualifier in there saying "Depending on your strategy". However, most of the logical strategies to me made this a valid point.

#2 ETFs generally don't pay capital gains distributions. http://finance.yahoo.com/news/etfs-capital-gains-distributions-remain-120000409.html Only 5% of the major ETFs paid capital gains. "And in almost every case, the distributions are very small--much less than 1% of the affected funds' net asset value."

bdbrooks

  • 5 O'Clock Shadow
  • *
  • Posts: 62
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #41 on: June 25, 2015, 09:54:07 AM »
bdbrooks while I generally agree with what you're saying, the individual stock momentum funds aren't all they are cracked up to be. They are generally too diversified, when only a concentrated fund will have a chance at outsized performance. http://www.dualmomentum.net/2014/11/individual-stock-momentum-that-dog-dont.html

I know this is off topic, but how concentrated is concentrated enough? MTUM has about 80% of its assets in 50 stocks. While I do think that they could get more concentrated, I think it is well worth the .15% expense ratio.

I would like to add that I agree that most people don't have the time, interest, and capability to fully vet most investment strategies.

Scandium

  • Handlebar Stache
  • *****
  • Posts: 2198
  • Location: EastCoast
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #42 on: June 25, 2015, 09:58:14 AM »
If you are questioning whether momentum (or value investing for that matter) actually works then you haven't looked at the research with an open mind. If you don't want to do the research and look for ways to get a slight edge in the market, then that is fine. Your approach is reasonable. However, so is mine.
Oh believe me I have. The more i read the more convinced I am that small cap, value, momentum or whatever flavor of the month is not worth it and will not perform any better that the index in the future. I read those links and was really convinced Bogle has much love for active management. He just ranked mutual funds, of course some active ones will perform well, duh.

Lay off it with the old "your mind isn't open" argument. Of course I wish I knew a secret to beating the market! Who wouldn't! But then I look into it and due to my nature I can only follow the data and i come away disappointed, again.

Furthermore, is .15% really that expensive for a strategy that has historically beat the market 
No, it wouldn't be to expensive for a strategy that will beat the market. But has and will are two different things. I think this might be Bogle's best speech on the subject. I've read it several times and it really changed the way I think:
http://www.vanguard.com/bogle_site/sp20020626.html

Aphalite

  • Bristles
  • ***
  • Posts: 425
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #43 on: June 25, 2015, 10:03:22 AM »
People throw this stat around but they don't mention the inverse - what if you missed the 100 worst days? From 1928 to 2010, if you missed the best 1% of all days your return gets crushed from 4.86% down to -7.08% per annum. However, the converse is true, if you miss the worst 1% of returns your returns explode to 19.09% a year. And take special note that if you miss both the best and worst 1% of days your return is higher than buy and hold. Source:

https://drive.google.com/file/d/0BzyyTlvGE-T2WUpTcThDVzlWeEE/view?usp=sharing

True enough hodedofome, but my point is, just like we can't tell when the ups will be, we can't tell when the worst days will be either - any momentum strategy uses a lookback period - by the time your lookback identifies the trend to get out or get in, the worst and best trading days will have already happened

#2 ETFs generally don't pay capital gains distributions. http://finance.yahoo.com/news/etfs-capital-gains-distributions-remain-120000409.html Only 5% of the major ETFs paid capital gains. "And in almost every case, the distributions are very small--much less than 1% of the affected funds' net asset value."

gotcha, that makes sense, thanks for the lesson - it's amazing how much taxes play into investing decisions, if only the US had a better tax system (maybe tax at the individual level?), investors wouldn't have to jump through any hoops - then again, it provides another advantage if you're willing to learn about it

hodedofome

  • Handlebar Stache
  • *****
  • Posts: 1211
  • Age: 39
  • Location: Texas
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #44 on: June 25, 2015, 10:07:14 AM »
True enough hodedofome, but my point is, just like we can't tell when the ups will be, we can't tell when the worst days will be either - any momentum strategy uses a lookback period - by the time your lookback identifies the trend to get out or get in, the worst and best trading days will have already happened


Actually, on Page 6 of the paper I quoted, it shows that 60-80% of the best and worst days occur when the market is below it's 200 day moving average (a very simple technical rule that's been around for decades).

Jeremy E.

  • Handlebar Stache
  • *****
  • Posts: 1946
  • Location: Lewiston, ID
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #45 on: June 25, 2015, 10:10:56 AM »
VGSIX - REIT Index Fund (I actually am investing in this)
VBLTX - Long Term Bond Index (I actually am investing in this)
VGENX - Energy Fund
VGHCX - Health Care Fund
I can't find a 5th Sector specific one that I woud consider investing in.

Aphalite

  • Bristles
  • ***
  • Posts: 425
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #46 on: June 25, 2015, 10:55:23 AM »
True enough hodedofome, but my point is, just like we can't tell when the ups will be, we can't tell when the worst days will be either - any momentum strategy uses a lookback period - by the time your lookback identifies the trend to get out or get in, the worst and best trading days will have already happened


Actually, on Page 6 of the paper I quoted, it shows that 60-80% of the best and worst days occur when the market is below it's 200 day moving average (a very simple technical rule that's been around for decades).

Sorry, don't have access to google apps here - Company is stingy. Question for you on this - you said 60-80% of best AND worst days occur - so is the suggestion to sit out the market when below 200 day moving average? You miss out on both best and worst days tho (not to mention dividends along the way - which is a pretty big factor in determining total returns), I can't read the paper but does it say what your overall return would be if you always sit out when market is below 200 day moving average versus staying in the entire time? Do you think too, that this trend will continue in the future? If you can't tell, then we're back to square one - I have no idea when the market will go up or down, I can only guess that the market will go up in the long run because historically it has and businesses (as opposed to cash) generate the most wealth over the long haul (but I don't know for sure), and I can guess that certain sectors, like tobacco, staples, energy, and healthcare will outperform others (but can't know that for sure either). I don't have anything against quantitative strategies, it just hasn't made sense to me is all (then again, a lot of investor behavior IS divorced from reality, so YMMV)
« Last Edit: June 25, 2015, 10:57:16 AM by Aphalite »

hodedofome

  • Handlebar Stache
  • *****
  • Posts: 1211
  • Age: 39
  • Location: Texas
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #47 on: June 25, 2015, 11:03:02 AM »
Here's a few screenshots of the paper, it shows that if you missed both the best and the worst, your returns were better than buy and hold. The reason is the best and world days happen in the most volatile markets, and the most volatile markets happen when the market is heading down. I'm not saying everyone should go out and do this, this is mostly in response to the idea that you should always buy and hold because you'll miss the best days. This analysis shows that there's more to the story. And of course the future won't necessarily be like the past.




capitalninja

  • Stubble
  • **
  • Posts: 102
  • Know what the other guy is making on the deal...
    • Entrepreneur, Investor, Life Advice
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #48 on: June 25, 2015, 11:48:42 AM »
Dunno if you've already made your purchases (thread was tl;dr) but Vanguard is about to declare dividends for most of their funds tomorrow (6.26.2015) so you have the rest of today to get your buys in to benefit from the upcoming dividends/distributions next week.

"Free" shares is always a nice thing imo.


Jeremy E.

  • Handlebar Stache
  • *****
  • Posts: 1946
  • Location: Lewiston, ID
Re: If you were to buy 5-10 sector-specific ETFs today . . .
« Reply #49 on: June 25, 2015, 11:56:42 AM »
Here are some that I've been watching...