Gary Hickman

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

dtv999,
Thanks for pointing out the error. You are correct but fortunately the relative performance comparisons are the same. The corrected numbers are:
2008 5 year average
HMF -33.3% +2.43%
SPY -34.3% - 0.20%
RSP -37.5% -0.75%

On Jan 06 02:10 AM dtv999 wrote:

> Hm, SPY did not lose 50% last year. I thought the market was down
> <40% for the year.

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&amp;P and then some. However,
> the return seems to outpace the S&amp;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&amp;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&amp;P is weighted over 11% have recently
> been performing worse than sectors where the S&amp;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?

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

Thanks for your comments. Actually, there is only one financial ETF in the portfolio- IYG. XLV is health care.


On Jan 05 10:11 AM User 331246 wrote:

> Thankyou for the portfolio idea. It seems reasonable except that
> the holdings include the financial services ishares AND the financial
> services SPDR. Why two ETFs in the financial services space, while
> everything else seems very balanced? Is this an intentional attempt
> to overweight one sector. It would seem to me that there will end
> up being a disproportionate amount of money going into companies
> like JP Morgan, Bank of America, and Wells Fargo. Would it be wise
> to swap out either xlv or iyg for something else? Regards, Dave

An ETF Package That Outperforms the S&P 500

bala,
just one correction to my earlier reply. IYG has had an average greater return than XLF over the past 7 years , with better performance in 5 of 7 years.

An ETF Package That Outperforms the S&P 500

bala,
As I briefly mentioned in the article, dividends and management fees were the main reasons for the ETF selections within a category. In perhaps an oversimplified look, DIA yields 2.3% with expenses of 0.17% vs. XLI yielding 1.6% and 0.24% expense ratio. For IYG vs. XLF, IYG has a slightly higher dividend, but more importantly it has outperformed XLF in each of the last 7 years, even with a higher expense ratio.