So, here in this blog post, we will dive head first into a different tract for the blog in general. We will start crushing numbers and do case studies on funds. Primarily on Vanguard funds since that is what I am going to have as my core or base funds. All other funds as well as stocks .. a small basket of them will be measured against this.
The aim of this study is to verify the fundamental soundness behind the idea of having the index funds and get a handle on what constitutes the timing and range for a buy and sell trigger or whether to simply not sell them .. in which case when does one sell it? So essentially we will be looking at all this. And we will do some stock comparison. Based on this we will address the core asset allocation model. And then comes the rebalancing criterias, the timings for buying and selling, this idea of a tool that I have developed for some time now.
Historically, I have dwelved on smaller stocks or medium level stocks. There have been some gains made and some losses too. Over time, this matured to holding only utility/REIT/Dividend paying stocks and few stocks which I characterized as having the zing. This zing bucket mainly had the chipotles, netflixes of the world. All sound businesses which I would have hold anyway. Such stocks also give the necessary zing to your portfolio over a short to medium time. But they can also have a very bad effect on it should they tank a quarter or report some earnings under investor expectations.
I would put Fidelity et. al below Vanguard for now mainly because the I have always invested with Vanguard more than Fidelity as well as there are more sector specific ETFs with Vanguard compared with the iShares. There are few cost differences here.
So we would compare Vanguard ETFs and mutual funds at times on one hand and then the stocks of mostly DOW stocks or S&P 500 stocks and at max. we will stop at the category leaders. A criteria that I have often employed is the institutional investor share. It should have a higher degree of this share. So is with beta. Though over time this and similar other technical indicators have found to be less worthy. Same with PE though PE does give a good idea about the cost of the security vis-a-vis its peers and overall stock market. There are similar indicators but as outlined early, we will not follow them deeply at the moment.
The vanguard indexes are the VO, VOO, VTI, and then the mid-cap, small-cap ETF, VNQ, sector ETFs.
Some of the active funds roster includes the VWELX and VBINX and other balanced funds. I have had funds in windsor and primecap before and they were not exactly kick ass performers in 2009. Same with Fidelity funds like contra. FCNTX is the only fidelity fund which I think needs any mention. Rest all, I did not find the jam in them.
In the stocks roster, market cap is definitely one criteria. So anything below say a 5B or 10B is not needed. Utility/REITs can be easily spread out and the risk managed. For the main stcoks such as the WMT and TGT or FDX and UPS, notice the pairings and split the money. Same with the CVS and Walgreens or in the tech world, GOOG and AAPL. Though being a techie, they are vastly different. Tech is also my main work sector as well as the stocks fickle though they have started to pay dividends since 2010. So maybe some money can be alloted to the tech sector. I was big on Finance early but drastically low there and will stick with only few but even WFC or AXP still have ups and downs. I am not a GS or regionals bank person. Same with industrials. Though at one point, I looked hard into the DEER stock, I think that time has passed and maybe instead of focussing so widely, it is better to focusing on the few. The concentration and attention and more importantly, the time is a critical factor and there is simply no leeway in putting attention to so many sectors and stocks. Better know a few sector and stocks and just invest in them. There are folks who are just public and private sector investors in just technology and they rake in much better performance while relying on just sector ETFs or a broader ETF - mutual fund combo for the rest. IT is also tough to look into the macro and micro economic factors in other sector, let alone the sector where you are earning your bread and butter. Over time I realised it is the money that you bring to the table, the one that you earn, your saving power that determines how much you keep rather than how much you invest or make money off other people's fees. Hence the popularity of the index funds.
To be continued ..
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