|
|
Post by steadyeddy on Mar 23, 2024 14:23:59 GMT
There are a couple of ways to think about this topic: - Equal weight all the 500+ companies, OR - Equal weight the 11 sectors The popular ETF RSP equal weights all the 503 companies; Another less popular ETF EQL uses equal weight sector strategy. I am leaning towards the second way of EqWt the 11 sectors. Pros or Cons? What are your thoughts? See the image below for current stats on the various sectors..  |
|
|
|
Post by yogibearbull on Mar 23, 2024 14:46:17 GMT
I am not happy with these sector definitions. For example, 1. A stock can belong only in one sector even when it may have multiple lines of businesses. 2. Techs are stuffed not only in XLK, but also in XLC ( META, GOOGL), XLY ( AMZN, TSLA). 3. Some such as XLE are hugely nondiversified. So, if I don't like these sectors, I won't like equal-weighting them either.  EQL charges 26 bps (gross 47 bps, net 26 bps after temporary 21 bps waiver) just to hold 11 ETFs in equal proportions. ETFs trade commission-free at major brokers. I think one may do better DIY with selecting some sectors from the 11. However, equal-weights within the broad SP500 ( RSP) or within specific sectors ( LINK) are fine. |
|
|
|
Post by steadyeddy on Mar 23, 2024 15:56:19 GMT
I am not happy with these sector definitions. For example, 1. A stock can belong only in one sector even when it may have multiple lines of businesses. 2. Techs are stuffed not only in XLK, but also in XLC ( META, GOOGL), XLY ( AMZN, TSLA). 3. Some such as XLE are hugely nondiversified. So, if I don't like these sectors, I won't like equal-weighting them either. EQL charges 26 bps (gross 47 bps, net 26 bps after temporary 21 bps waiver) just to hold 11 ETFs in equal proportions. ETFs trade commission-free at major brokers. I think one may do better DIY with selecting some sectors from the 11. However, equal-weights within the broad SP500 ( RSP) or within specific sectors ( LINK) are fine. Thanks yogibearbull |
|
|
|
Post by Mustang on Apr 13, 2024 1:58:59 GMT
Those are interesting adaptations of the bucket strategy. Since you want to withdrawal $100,000 per year and bucket 2 provides $100,000 per year it appears to be more of an income withdrawal strategy than a bucket strategy. Bucket 3 really isn't doing much. In the first example it is so small it doesn't provide much growth and re-balancing to refill buckets 1 and 2 isn't needed. In your second example, you have taken more risk in bucket 2 to provide the $100,000 income and bucket 3 still isn't used to refill buckets 1 and 2. Bucket 3 appears to be more of an emergency bucket than a retirement bucket. Christine Benz, an expert on the bucket strategy, acknowledges that different people would set up the buckets differently depending on need but provides a general guide for investors. For an investor who needs $32,000 yearly from a $1M portfolio. Bucket 1 would hold 2 years of withdrawals plus a $25,000 emergency fund for a total of $98,000. Bucket 2 would hold 8 years of $32,000 withdrawals (years 3 through 10) for a total of $256,000. Bucket 3 would hold the rest, $646,000 or 64.6% of the portfolio. For a $3M portfolio bucket 3, under her system, would be $1.25M. www.morningstar.com/personal-finance/bucket-investors-guide-setting-retirement-asset-allocation. (Note: I prefer keeping retirement assets separate for other assets like emergency funds but Benz has merge it into Bucket 1.) Bucket 2 was meant to last 8 years, not provide total income. Don't get me wrong. An income withdrawal method is an excellent method if the portfolio is large enough to support it. It appears to me that is what you are shooting for, not the bucket approach.
But, this is a little off topic for this thread.
|
|
|
|
Post by liftlock on Apr 13, 2024 18:50:05 GMT
Oh okay thank you so much! Admittedly I need to read more on the bucket approach - I thought AI would know it's stuff better than it does! Might be fun to start a thread to test AI ability to provide guidance with some well structured prompts. Ed Yardeni recently appeared on Wealthtrack where he discussed AI. He tried using ChatGBT but abandoned it because he spent more time correcting the errors it generated. He concluded it took less time to just write things from scratch. He described ChatGPT as very fast auto correct on a smart phone that is often wrong. I haven't tried it so I don't have my own opinion of it. |
|
|
|
Post by liftlock on Apr 13, 2024 18:56:28 GMT
|
|
