Hello, I'm learning about ETFs. They seem like a great way to get efficient diversification. I know the SPY and the Russell 2000. The other ones I'm just getting to know. It pretty much consists of "wow, I'd like to buy that one, and that one, and that one...". Especially those iShares ETFs... jeez! It's like being in a stock candy store. Is there a good starter set of equity ETFs? If you had to pick 4 that should be in just about everyone's portfolio, what would they be? The collection aspect is interesting, because it could be the 4 of them working together that provide some sort of synergy. I'm thinking maybe something like: 1) S&P 500 2) Russell 2000 3) The ishares EFA, which has "exposure to a broad range of companies in Europe, Australia, Asia, and the Far East" 4) some sort of Europe ETF But other than the S&P 500 and Russell 2000, I'm not sure which ones are standard for everybody's collection. I understand there are over 1000 different ETF's you can buy. But I'm wondering what the most standard ones are. Maybe there is no such thing? I learned today that the XLF is the most standard financial ETF. I like the idea of knowing what the standard ones are. Then I know if I'm being normal or eccentric.
Warren Buffet wrote in 2013: ''My money, I should add, is where my mouth is: What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit. (I have to use cash for individual bequests, because all of my Berkshire shares will be fully distributed to certain philanthropic organizations over the ten years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers.'' In other terms, one may choose to follow this strategy: 90% SPY or equivalent 10% SHY or equivalent
XLF and SPY are from these guys. https://us.spdrs.com/en/product/ They have a set of sector related ETF’s like XLF.
I've experimented with ETF-based sector rotation strategies in the past. e.g. Here's a list of ETFs for a "global rotation" based on world regions: MDY - United States IEV - Europe EEM - Emerging Markets ILF - Latin America EPP - Pacific (without Japan) EDV - Treasuries (could also choose TLT or SHY) The idea is different parts of the world experience growth at different times. During global downturns, money tends to flow into bonds hence the treasuries ETF. There are many approaches to asset allocation among these ETFs. You could put all your money in 1 at a time based on recent performance (aggressive) or you could own all of them and manage the portfolio using normal beta weighted portfolio management (conservative). The original global rotation strategy article is here: https://seekingalpha.com/article/16...annual-performance-of-41_4-percent-since-2003
I would start with a list of the major sectors, then go from there. General market... SPY, QQQ, Dow, Small Cap..., Emerging Market, Financial, Tech, Biotech, Energy, Gold, Pharma, Health Care, China, Japan, Germany, Brazil, Bonds. Once you get a handle on these, you can add more specific ones. (Heard on Bloomberg yesterday... there are "70 Tech ETFs".... hadn't known there were that many.)
Don't forget the mighty NDX-100(QQQ) and at least consider the DIA - the NDX-100 has been leading this bull the last few years and the DIA has been the second best index since Aug 2017. If you want high growth you have to follow it.