How do you diversify using all ETF portfolio?

[Compuhi]

Originally Posted by Petunia 100

I think you're making this harder than it needs to be. Buy total market index funds, foreign and domestic, throw in some bonds. Tilt a bit if you must (value, small value, Reits, etc.) There, you're diversified.

Agreed. Simply investing in VTI (total stock market) and BND (Bonds) would diversify your portfolio quite a bit and buffer you from any one company.

[Big-Bucks]

Originally Posted by mathjak107

the s&p 500 also lagged the mid caps and small caps by 5-6% every single year the last 5 years. i would think you would want some diversification in to those areas too ,only thing is a total market fund will let you look in the window at the party but not join it. i certainlty would add an extended market fund to that s&p 500 fund before i would call it diversified.

Fine. You want a little more risk? Then buy the total stock market index. Again, just one fund is all it takes.

[mathjak107]

there really is no difference between an s&p 500 fund and a total market fund , that is my point .

it hardly pays to bother.

if you really want diversification you need an s&p 500 fund and an extended market fund NOT a total market fund which is barely more than just an s&p 500 fund.

especially now where odds are the s&p 500 after being the only game in town last year will likly lag behinmd the midcaps which it is indeed already doing.

[mathjak107]

for very broad diversification i like this one from bob clyatt author of work less live more . i really enjoyed reading his book. bob is also an active participant on a popular early retirement forum many here frequent.

it is still conservative in its allocations actually being about a 50/50 mix. he calls it the RIP.( rational investing portfolio)


20% VFINX S&P500
8% VTMSX Tax Managed Small
6% VGTSX Total International Equity
10% VINEX Internat'l Explorer (small)
6% VEIEX Emerging Markets
30% VBIIX Intermediate Bond Index
11% BEGBX International Bond
5% VGSIX REIT Index
4% Money Market Fund


here are some results for the above

2007 7.58%
2008 -20.34%
2009 23.10%
2010 13.36%
2011 0.72%
2012 11.85%
2013 11.81%

for those who really want diversification he recommends the long version of the above for those really into investing and getting involved.

US Large Stocks Value Tilt 12%
US Small Stocks Value Tilt 8.5
International Large Stocks 5%
International Small Stocks 10%
Emerging Markets Stocks 6.5%
ST Corp Bonds/Money Market 4%
US Govt Bonds-Long 4%
Med-Term US Bonds 10%
Med Term Int Bonds 12%
GNMA Bonds 5%
High Yield Bonds 4%
Oil and Gas 3%
Market Neutral Hedge Fund 2%
Commodities 4%
Comm Real Estate 5%
Venture Cap/Private Equity 5%

[CaptainNJ]

after 2014 and all the distributions i have received from my mutual funds, i am starting to think more about a more tax efficient etf portfolio.

[mathjak107]

but the flip side is boy if you make changes down the road pent up taxes for decades can make things very cumbersome to change quickly and efficiently .

[CaptainNJ]

Originally Posted by mathjak107

but the flip side is boy if you make changes down the road pent up taxes for decades can make things very cumbersome to change quickly and efficiently .

yeah, you would be sitting on a boatload of capital gains to be paid. but it seems like a decision of "pay it now or pay it later" and i generally favor paying it later. its not like it will cost more. unless the tax rate increases, then id have to decide whether or not to sell based on changes in the rate.

if you invested in index funds, the sudden need for selling an entire position should be unlikely. so you just sell what you want to sell and leave the rest of the holding untouched. paying only the bit of long term capital gain tax that you choose.

my biggest question is return. am i going to get a better return with my select portfolio than an aggressive index portfolio?

[mathjak107]

I am laughing to myself because that was my attitude all through life , I rather delay what I can when it comes to taxes.

well now that I made it to the end zone boy do I regret having to deal with them now.

the problem is you get to deal with them when there are no more pay checks coming in rather than when one or 2 pay checks are flowing in earlier in life.


now those taxes can be a tough thing to deal with in the budget.

[CaptainNJ]

I notice I just got some serious distributions on Friday and the worst part is that a large chunk of it was short term gains. I'll see it better tomorrow but i know I'm not thrilled.

[CaptainNJ]

looks like about 75% of last Friday's capital gains distributions (fidelity select mutual funds) were short term. that concerns me. I actually needed the cash to cover my tax payments but im not happy that im going to be paying a high tax rate on those distributions.