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Posted by Shhhh on November 1, 2006, 4:59 am
Hello all,
I'm constantly reading about experts and investors that suggest putting
together an ETF portfolio... one of the things that strikes me right off the
bat about this strategy is the large amount of overlap that exists... I mean
why SPY and DIA. Seems to me 1 would work just fine. If looking for a bit
more risk in a more concentrated portfolio go with DIA, more diversification
go with SPY. I hear so many people who talk about ETF portfolio's include
both of these, then of course they add their sector specific options, which
also more than likely overlap either the SPY or in some cases the MDY
(midcap)
More and more I'm comming to the conclusion that a complete portfolio of
ETFs are a fools game. Perhaps, to gain exposure to a specific sector or
market you feel will do well such as GLD (gold), SLV (silver), IHI (medical
devices), EEM (emerging markets), etc. otherwise just pick the stocks
yourself.
Am I wrong here? what am I missing
Thoughts and opinoins welcome,
Shhhh
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Posted by Rich Carreiro on November 1, 2006, 5:45 am
> More and more I'm comming to the conclusion that a complete portfolio of
> ETFs are a fools game.
A complete portfolio of ETFs is no more or less of a fool's game
than a complete portfolio of mutual funds. After all, that's
all ETFs are -- mutual funds.
> otherwise just pick the stocks yourself.
>
> Am I wrong here? what am I missing
That it's harder to "just pick stocks yourself" than you think.
That said, you are correct in noting that someone adding SPY
to DIA holdings is fooling themselves if they think they
have meaningfully diversified.
--
Rich Carreiro rlcarr@animato.arlington.ma.us
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Posted by John A. Weeks III on November 1, 2006, 7:53 am
> More and more I'm comming to the conclusion that a complete portfolio of
> ETFs are a fools game. Perhaps, to gain exposure to a specific sector or
> market you feel will do well such as GLD (gold), SLV (silver), IHI (medical
> devices), EEM (emerging markets), etc. otherwise just pick the stocks
> yourself.
>
> Am I wrong here? what am I missing
1) Very few people can afford to own enough stocks in large enough
quantity to be reasonably diversified and not be paying a huge
percentage of their funds towards commissions. Buying raw stock
is just not that efficient for the smaller investor.
2) How would one add, for example, 5% to their stock portfolio
and not get out of balance if you own individual stocks? Again,
if you add a little to each different stock, the commissions are
going to eat you alive.
An ETF (or index fund) does all this in one simple efficient package.
-john-
--
======================================================================
John A. Weeks III 952-432-2708 john@johnweeks.com
Newave Communications http://www.johnweeks.com
======================================================================
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Posted by Charlie on November 1, 2006, 7:57 am
I think you have the right ideas about ETFs. They are a version of a
mutual fund. Buying any collection of funds that all work in the same
general part of the market or that significantly overlap is not wise.
There is a commentary from the professionals that the narrow niche ETFs
are also probably not good for the average investor.
I am looking at ETFs that deal with indexes for markets in specific
countries around the world, mainly Europe and China. China is a
dangerous game and I see the ETF as both diversification in that market
and letting a professional team do the work that I as a low key average
guy cannot possibly do.
Other ETFs I am interested in are some REITs in different regions or
kinds of markets and a few industrial index funds that seem to be
generating strong returns.
Beyond all that my principal interest is individual stocks with global
promise. The dollar is in trouble again and individual stocks based in
the U.S. or traded on the American exchanges that show a broad global
footprint are my principal interest and are the ones finding their way
into my portfolio. I am suprised by how many positions in the portfolio
are ETFs, however.
======================================= MODERATOR'S COMMENT:
Thank you for trimming the previous post.
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Posted by Tad Borek on November 1, 2006, 12:19 pm
Charlie wrote:
> I am looking at ETFs that deal with indexes for markets in specific
> countries around the world, mainly Europe and China. China is a
> dangerous game and I see the ETF as both diversification in that market
> and letting a professional team do the work that I as a low key average
> guy cannot possibly do.
Charlie, before buying a China ETF be sure to check this week's Barron's
which had an interesting piece on the two China ETFs ("China Funds'
Shell Game," Oct 30 2006). One of the ETFs has some conflicts of
interest regarding the ETF promoter and the stocks added to the ETF,
which might partially explain the big difference in returns.
-Tad
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