Building a diversified ETF portfolio
If you were to build an ETF portfolio consisting of " in favor and out of favor" sectors, including some sectors that act contrary to the general market, what ETF's (please indicate their sectors) would you envision such a portfolio would have? (10 ETF's or less with $50,000 to invest, with rebalancing every 3 or 6 months).
Any guidance would be greatly appreciated. Thank you
Answers
3127 points
EthanR answered one year ago …
Awesome question! Right now out of favor would be homebuilders, financials(XLF), and airlines. In favor would be oil (DIG), gold (GLD), consumer staples (KXI), materials (MXI). China (FXI) and Emerging Markets (EEM) had been doing great, but seem to have lost their steam in recent weeks. Utilities (UPW) have done well this past year.
I think any ETF portfolio might include a small amount of QLD (2x the Nasdaq 100) or more conservatively, the DIA (DOW 30)) as a base in a rising market. Sprinkle in a little DIG, a pinch of GLD, a healthy dash of XLF, and you have a nice ETF stew! Dollar cost average into FXI and EEM when they stop going lower. If you want something that acts contrary to the general stock market, then you can go with a bond fund like AGG, or put a small position into the QID or DOG, both of which short the general markets. These will curtail your profits during bull markets, but give you a hedge during bear markets.
2547 points
Oldman answered one year ago …
I agree with Ethan R above. I would suggest using SeekingAlpha ETF blogs to look at the ETFs that have risen or fallen and to keep in mind that the international ETFs (e.g., intl staples vs domestic staples) seem to have better performance. Bespoke Investments Research posts regular comparisons on the SA site, and shows overbought/oversold info.
There's also a long series of lazy ETF portfolios, trying to mix uncorrelated ETFs and keep expenses down, that might give you a great portfolio allocation idea. Alternatives to some of the ETFs above are KRE (Regional Banks) ITB (home Builders) = Down; XLF and UTF (Steel)l and (Utilities) = Up; etc. Be aware of the trading costs for dollar cost averaging into or out of ETFs; maybe wait till after Jan. 08 to avoid buying dividends from those that do have them; there are shorts and ultrashorts; leveraged and double leveraged ETFs for some of the Indexes.
2547 points
Oldman answered one year ago …
Whoops, not XLF but SLX = steel. sorry about that.
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