Gary Hickman

An ETF Package That Outperforms the S&P 500: Update

DRH,
Your analysis seems valid. My goal was to be very diversified and it has worked so far. As mentioned in my original article, the portfolio is revised slightly once each year. I also made a computational mistake, but the comparisons are still valid. (see my reply to dtv999)


On Jan 05 07:38 PM DRH wrote:

> Sorry Gary, my mistake, got the symbols confused.
>
> If you wouldn't mind continuing the discussion...I have analyzed
> your HMF, and had a few other comments. You have chosen sector based
> ETFs representing all the major sectors. Between all your ETFs you
> basically have every stock in the S&P and then some. However,
> the return seems to outpace the S&P (at least for the years you
> were able to track). I believe the key difference is that you are
> equal weighting each sector. If we look at the S&P it is usually
> not close to being equal weighted between sectors. At present, SPY
> has about 15% financial services and less than 4% utilities. Your
> HMF has 11% everywhere (I'm assuming you would rebalance once every
> year or two). I would suggest that your HMF is doing better because
> the sectors where the S&P is weighted over 11% have recently
> been performing worse than sectors where the S&P is weighted
> less than 11%. In a nutshell, the equal sector weighting provided
> a little less exposure to underperforming sectors and more exposure
> to the better performing sectors.
>
> Don't get me wrong, I think this is still a better approach than
> just simply putting everthing into SPY or RSP. It certainly results
> in a more diversified portfolio.
>
> Any thoughts?