Etf portfolio design

Developing a portfolio of ETFs does not have to be complicated, but it is advisable to analyze what the experts say, what directions can be given, what consequences in terms of performance, volatility, etc. can be expected and it would always be worth analyzing our needs and our interests to apply a specific strategy that guides us in the maintenance of the portfolio, when to enter, when to leave, with what criterion to replace one etf by another, etc.

Remember that as explained in the Disclaimer page the information posted is a compilation of publicly available documentation that I have found helpful in one way or another. In no way is intended to give any guidance, instruction or advice regarding financial or any other subject matters. The study, analysis and critical review of the documentation are therefore recommended and therefore any liability for the use made of the information presented here is declined.  The information should be considered a source of study and inspiration, and the investor should not buy or sell without a thorough investigation.

A basic rotation strategy is to start buying shares in the 2 etf’s of the 8 or 9 most representative of the market sectors that have done best in the last 6 months. Then, monthly review the performance of all of them, and the moment any of ours is not among the 50% of etf’s best performing, we sell it and we acquire the best that has in the last 6 months.- This, and other strategies detailed in “ETF Trading Strategies Revealed”  book by David Vomund, and more on ETF’s in general in the Post “ETF’s – What are the Exchange Traded Funds“.

Here few samples:

25 ETFs portfolios classified by different themes (Dividends, income, low volatility, …) Posted by

Download (PDF, 642KB)

8 popular portfolios for lazy people grouped and published by Oblivious Investor

Download (PDF, 71KB)

And also from ETF.db an example of portfolios where they detail their level of risk, their time horizon and other interesting characteristics.

Download (PDF, 381KB)

At least it is feasible to get ideas to move forward and if we analyze the historical returns of each Etf, end up deciding if we stay calm with our money deposited in them.

If we want to develop our own portfolio according to different typologies of etf’s, we can access the Guide of Etf’s by market sectors of Seeking Alpha to see the alternatives.

Another important source of information to analyze Etf’s and keeping up with the latest news is Morningstar. Devoted historically to mutual funds, has recently published a section specifically oriented to ETF’s.

The Spanish website for Morningstar is also publishing monthly Correlations between Categories and Correlations between Sectors to analyze the relationship between rises and falls for different sectors and categories of market. The idea is diversify and that we do not raise or lower in unison all etf’s of our portfolio , (Although there will always be those who defend just the opposite, that concentrating instead of diversifying is key to increasing yields).

“The way to become rich is to put all your eggs in one basket and then watch that basket.” – Andrew Carnegie

“Do not put all eggs in one basket” – Warren Buffett

 At the end, final decision is yours