DRH

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

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?


On Jan 05 10:53 AM Gary Hickman wrote:

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