Lowering Number of Positions, With Varied Weightings: Model Portfolios (ETFs: IVV, DVY, IJS, XLE)

Roger Nusbaum submits: In response to my 2%-3% comment as a suggested exposure to China, a reader (very reasonably) points out that some people don't want to have to keep track of too many holdings and suggests 5%-10% positions instead. This is a good question.

China is volatile. The more exposure you have to China the more volatile your account will be. As I read the question, the reader would be more comfortable only tracking 10-20 holdings (I base this on his 5%-10% comment). Let's say that this reader has 70% of his equity portfolio in domestic stocks and 30% in foreign. Isn't it possible that the entire domestic allocation could be covered in four or five ETFs? Perhaps the domestic could be as follows:

iShares S&P 500 Index (IVV) 30%
iShares Select Dividend Index (DVY) 20%
iShares S&P SmallCap 600 Value Idx (IJS) 15%
Energy Select Sector SPDR (XLE) 5%

That leaves 30% of the portfolio that could be sliced up into as many as (based on the reader's comment) 16 holdings.

I have no accounts that look like what I have above, nor would I suggest that allocation as a first choice to anyone but it makes a point. If you can manage a dozen holdings, one of the dozen could be 25% of the account and another could be as little as 2%.

If you are not going to use individual stocks, which is perfectly OK, I would advise that you drop the notion that things should be equal weight in the portfolio. Ten holdings does not mean everything at 10% of the account.

UPDATE: A reader left the following ETF portfolio in the comments. If you want simple, this looks pretty good:

Rydex S&P Equal Weight (RSP) 40%
iShares Select Dividend Index (DVY) 30%
PowerShares Intl. Dividend Achiev. (PID) 20%
An Emerging Markets ETF 10%

He disclosed that he used iShares MSCI Canada Index (EWC) for his emerging market idea.