13.MY ETF MARKETPLACE

by theknownothinginvestor

After I settled each asset allocation I went searching for the equivalent ETF. Because US ETF market is much bigger and offers an enormous variety of funds compared to Europe I decided only to buy US ETFs.

My primary goal was to find ETFs with lowest expense ratio possible, but I also took a peek at market capitalization. Coincident or not, low expense ratios are normally associated with big market caps. In the long run every expense counts.

To define what to buy I used an ETF database and through a simple search of categories I quickly gathered an ETF portfolio, with different asset classes and geographical diversification.

It had passed 7 month since I had quit short-term trading. That was the time I took to learn about ETFs, long-term investing, multi-asset portfolio and how to make one. This was the result:

PortfolioAllocation

 

The expensive ratio is really low with a figure of just 0.17. This means that in a 10 000 usd value portfolio 17 usd will be used in management costs by the ETF issuers. Try to beat this mutual funds!

I was also glad to confirm that the Vanguard ETFs were the ones with lower expense ratios, meaning that Mr. John Bogle’s investing philosophy is still nurtured in his company, which sadly isn’t the mainstream policy in financial business.

The most expensive ETF is the commodity one, DBC – PowerShares DB Commodity Index Tracking Fund, but this was expectable because of contango effect. There were others cheaper, but I wasn’t very fond of their market caps, so I decided to go with the most valued one.

Vanguard also have a cheaper ETF for big american caps instead of SPY, but choosing between them represented less than $0.5 and this allowed me to be exposed to more ETF issuers. It’s also neat to have the benchmark in my portfolio for performance purpose.

Another particularity is that instead of having only one ETF for US stocks, normally it’s choose an ETF for small cap value equities because they have better historical returns, I rather divided it three small, medium and big caps. I like the a idea of following a company’s growth, from small to big cap.

This time it would be different I would make money. I would use my short term knowledge and market-timing for perfect entries. Knowing that if I failed, time would ill mistakes. Although this time I wouldn’t do that kind of mistakes.

I had the money, I knew what ETFs to buy, I was a fresh customer of an US based broker. I had it all. Once again I was so full of myself that I forgot passed lessons and bought all the ETFs in one week and then the market went for a correction.

Oops I did it again…

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iShares –  iShares 20+ Year Treasury Bond ETF – TLT

iShares  – iShares TIPS Bond ETF – TIP

SPDRButon– SPDR Barclays Intermediate Term Treasury ETF – ITE

VanguardButon– Vanguard REIT ETF – VNQ

iShares – iShares Gold Trust – IAU

Invesco– PowerShares DB Commodity Index Tracking Fund – DBC

VanguardButon– Vanguard FTSE Emerging Markets ETF – VWO

SPDRButon– SPDR S&P 500 ETF – SPY

VanguardButon– Vanguard Mid-Cap Value ETF – VOE

VanguardButon– Vanguard Small-Cap Value ETF – VBR

VanguardButon– Vanguard FTSE Pacific ETF – VPL

VanguardButon– Vanguard FTSE Europe ETF – VGK

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