Trading the S&P with long-term moving average... are you talking about technical analysis and switching funds when the technicals start to look negative? I was planning to use ETFs as buy/hold/rotate/rebalance. There can be tax inefficiency if you switch funds a lot. The taxes will be income rate taxes rather than capital gains tax rates.
I don't need the cash anytime soon. I can go higher than 60% equities. I'm just wondering within your equities percentage, how much is too much for the S&P. Warren Buffet says many people can simply put 90% in the S&P and 10% in fixed income/cash. But many portfolio authors talk about spreading your equities across value/ growth/ small/ large/ international. They say you get slightly better returns and slightly less volatility. So it's a win-win to not just do all S&P. Then again, when Warren speaks, people listen.
It's a question of volatility. Since the S&P is volatile, older people who may need to make some withdrawals may be better off with a mixture. And advisers know that if there is too much rock and roll, their clients will not stay the course or will find a new adviser. As you know, all the stock funds will tank when stocks go down. I do think Buffet is right. If you're young, can truly implement buy and will absolutely hold through thick and thin, you can buy a lot of stocks. Mebane Faber, in the Ivy Portfolio and his papers on tactical asset allocation, shows that using the 10-month moving average gets you the same or slightly better results than B&H, with far less volatility, whether or not you are using the S&P alone or a mixture of funds. You can google his papers on tactical asset allocation, and since you have already educated yourself pretty well about ETFs, you can read section 3 of the book and skip the rest. You don't need to make very many switches or use very many funds with his methods: I think you could implement them with only 2 or 3 funds. And when you have a system with less volatility, you can more than make up for the tax inefficiency with just a small amount of leverage. Using a little margin is not that big a deal when you have removed a lot of the volatility from your portfolio. However, I would not suggest using leverage if you are simply holding a basket of ETFs, because you'll get hurt badly in downturns. Just as an example, if you were using the Otar hurricane warning system with the S&P (see left side of this page: http://www.retirementoptimizer.com/), you would have made 14 switches (7 trips in and out) since 1988. That's about 1 switch every other year. And yes, there would have been some years with worse tax efficiency. Personally, if I were young (I'm not) and I wanted to do B&H (I don't), I'd just buy IJS (small cap value, which over long time periods is likely to best everything else) and call it good for 30-40 years. I recommend that you check out the stuff Ploutos is writing on Seeking Alpha; in his many articles he suggests several useful methods to improve results with less volatility and few or no trades. With B&H, it's best to limit the number of decisions you need to make. You have to avoid tweaking and refining your choices, which may lead to underperformance. I hope this is helping.