Equal weight sector ETFs with SCV tilt?

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Topic Author
manlymatt83
Posts: 314
Joined: Tue Jan 30, 2018 8:23 am

Equal weight sector ETFs with SCV tilt?

Post by manlymatt83 »

I want to know what folks think of:

60% all SPDR sector ETFs, equal weight.
20% SLYV
10% DGS
10% DLS

I believe in the small & value factor, but I also believe in not being overweight tech (or any other industry) in general and there's a premium to be had there as well.

I've heard the SPDR sector ETFs are solid picks @ 13 BP but that the Vanguard funds are similar exposure @ 10 BP, so I could also consider those.
Longtermgrowth
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Joined: Thu Nov 26, 2015 1:59 pm

Re: Equal weight sector ETFs with SCV tilt?

Post by Longtermgrowth »

Edited: there are 11 SPDR sector ETFs, sorry for the inaccuracy in my original post below:
There are 5 SPDR sector ETFs: XLC (Communication Services), XLP (Consumer Staples), XLY (Consumer Discretionary), XLE (Energy), XLF (Financial).

20% in a few of those would be a huge deviation from where the market is at (select "Holdings" and scroll down to "Fund Sector Allocation"): https://us.spdrs.com/en/etf/spdr-portfo ... t-etf-SPTM

My thoughts are stick with total market instead of equal weighting sector funds, and tilt to large value as well as small value if not happy with the tech (growth stock) percentage in your core fund.
At any rate, here's a bump for your thread :sharebeer
Last edited by Longtermgrowth on Mon Nov 04, 2019 10:01 pm, edited 1 time in total.
snailderby
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Re: Equal weight sector ETFs with SCV tilt?

Post by snailderby »

1. I think that's fine if you're OK with potentially lagging (or overperforming) the market, and you're willing to deal with the hassle of rebalancing (or you can just create an account at M1 Finance).

2. SPDR's and Vanguard's sector funds both sound like reasonable options to me. I think Vanguard's sector funds include more mid and small caps.
Last edited by snailderby on Mon Nov 04, 2019 9:20 pm, edited 1 time in total.
Topic Author
manlymatt83
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Re: Equal weight sector ETFs with SCV tilt?

Post by manlymatt83 »

Longtermgrowth wrote: Mon Nov 04, 2019 9:12 pm There are 5 SPDR sector ETFs: XLC (Communication Services), XLP (Consumer Staples), XLY (Consumer Discretionary), XLE (Energy), XLF (Financial).

20% in a few of those would be a huge deviation from where the market is at (select "Holdings" and scroll down to "Fund Sector Allocation"): https://us.spdrs.com/en/etf/spdr-portfo ... t-etf-SPTM

My thoughts are stick with total market instead of equal weighting sector funds, and tilt to large value as well as small value if not happy with the tech (growth stock) percentage in your core fund.
At any rate, here's a bump for your thread :sharebeer
Thanks! What do you use for a tilt to large value, curious?

And aren't there 11 SPDR sector ETFs?
Topic Author
manlymatt83
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Re: Equal weight sector ETFs with SCV tilt?

Post by manlymatt83 »

snailderby wrote: Mon Nov 04, 2019 9:18 pm 1. I think that's fine if you're OK with potentially lagging (or overperforming) the market, and you're willing to deal with the hassle of rebalancing (or you can just create an account at M1 Finance).

2. SPDR's and Vanguard's sector funds both sound like reasonable options to me. I think Vanguard's sector funds include more mid and small caps.
What about just holding what is significantly under-represented? Looks like right now, that would be energy, utilities, materials & consumer defensive?
Windylotus
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Re: Equal weight sector ETFs with SCV tilt?

Post by Windylotus »

SPYV - SPDR Portfolio S&P 500 Value ETF (ER 0.04%)
Topic Author
manlymatt83
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Re: Equal weight sector ETFs with SCV tilt?

Post by manlymatt83 »

Windylotus wrote: Mon Nov 04, 2019 9:27 pm SPYV - SPDR Portfolio S&P 500 Value ETF (ER 0.04%)
Curious -- Paul Merriman recommends $RPV. Curious why you chose $SPYV?
Windylotus
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Re: Equal weight sector ETFs with SCV tilt?

Post by Windylotus »

mjuszczak wrote: Mon Nov 04, 2019 9:32 pm
Windylotus wrote: Mon Nov 04, 2019 9:27 pm SPYV - SPDR Portfolio S&P 500 Value ETF (ER 0.04%)
Curious -- Paul Merriman recommends $RPV. Curious why you chose $SPYV?
I actually hold them both. I have RPV in a Roth IRA in Paul's UBH portfolio and also SPYV in my TD Ameritrade HSA account which trades for free.
Topic Author
manlymatt83
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Re: Equal weight sector ETFs with SCV tilt?

Post by manlymatt83 »

Windylotus wrote: Mon Nov 04, 2019 9:37 pm
mjuszczak wrote: Mon Nov 04, 2019 9:32 pm
Windylotus wrote: Mon Nov 04, 2019 9:27 pm SPYV - SPDR Portfolio S&P 500 Value ETF (ER 0.04%)
Curious -- Paul Merriman recommends $RPV. Curious why you chose $SPYV?
I actually hold them both. I have RPV in a Roth IRA in Paul's UBH portfolio and also SPYV in my TD Ameritrade HSA account which trades for free.
Ah! What do you use for your core holdings? Do you only tilt or are you all value?
Windylotus
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Re: Equal weight sector ETFs with SCV tilt?

Post by Windylotus »

mjuszczak wrote: Mon Nov 04, 2019 9:40 pm
Windylotus wrote: Mon Nov 04, 2019 9:37 pm
mjuszczak wrote: Mon Nov 04, 2019 9:32 pm
Windylotus wrote: Mon Nov 04, 2019 9:27 pm SPYV - SPDR Portfolio S&P 500 Value ETF (ER 0.04%)
Curious -- Paul Merriman recommends $RPV. Curious why you chose $SPYV?
I actually hold them both. I have RPV in a Roth IRA in Paul's UBH portfolio and also SPYV in my TD Ameritrade HSA account which trades for free.
Ah! What do you use for your core holdings? Do you only tilt or are you all value?
No not all value, just tilt. Sounds like you're familiar with Paul's UBH portfolio

The TD account is also a Merriman account
6% SPLG
11% SPYV
11% SPSM
12% SLYV
5% USRT
9% SPDW
9% EFV
9% GWX
9% DLS
5% SPEM
5% EWX
4% IFGL
(sorry to throw all the tickers at you)

I have deviated from the above percentages though. I've decided to do about 50% of the portfolio in a traditional two fund US/International (60/40) split and the rest in the above tilts.
Longtermgrowth
Posts: 727
Joined: Thu Nov 26, 2015 1:59 pm

Re: Equal weight sector ETFs with SCV tilt?

Post by Longtermgrowth »

mjuszczak wrote: Mon Nov 04, 2019 9:19 pm Thanks! What do you use for a tilt to large value, curious?

And aren't there 11 SPDR sector ETFs?
Hmm, you're right, went by what I saw in a PDF doing a quick search :oops:
I go the unconventional route and use a dividend fund (VYM mostly) for large value, but Paul Merriman has a good best in class ETF list: https://paulmerriman.com/best-in-class- ... hold-2019/

For US large value, the Vanguard fund he recommends is VONV, which currently only has 6.1% in tech: https://investor.vanguard.com/etf/profi ... folio/vonv
Topic Author
manlymatt83
Posts: 314
Joined: Tue Jan 30, 2018 8:23 am

Re: Equal weight sector ETFs with SCV tilt?

Post by manlymatt83 »

Windylotus wrote: Mon Nov 04, 2019 9:51 pm
mjuszczak wrote: Mon Nov 04, 2019 9:40 pm
Windylotus wrote: Mon Nov 04, 2019 9:37 pm
mjuszczak wrote: Mon Nov 04, 2019 9:32 pm
Windylotus wrote: Mon Nov 04, 2019 9:27 pm SPYV - SPDR Portfolio S&P 500 Value ETF (ER 0.04%)
Curious -- Paul Merriman recommends $RPV. Curious why you chose $SPYV?
I actually hold them both. I have RPV in a Roth IRA in Paul's UBH portfolio and also SPYV in my TD Ameritrade HSA account which trades for free.
Ah! What do you use for your core holdings? Do you only tilt or are you all value?
No not all value, just tilt. Sounds like you're familiar with Paul's UBH portfolio

The TD account is also a Merriman account
6% SPLG
11% SPYV
11% SPSM
12% SLYV
5% USRT
9% SPDW
9% EFV
9% GWX
9% DLS
5% SPEM
5% EWX
4% IFGL
(sorry to throw all the tickers at you)

I have deviated from the above percentages though. I've decided to do about 50% of the portfolio in a traditional two fund US/International (60/40) split and the rest in the above tilts.
This helps me, actually! I've heard of "conflicting" ETFs that can cancel each other out. But in this case, Merriman wouldn't yell at me if I did something like:

50% VT
25% SLYV
15% DLS
10% DGS

I assume that is a true tilt, right?
Topic Author
manlymatt83
Posts: 314
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Re: Equal weight sector ETFs with SCV tilt?

Post by manlymatt83 »

Longtermgrowth wrote: Mon Nov 04, 2019 9:53 pm
mjuszczak wrote: Mon Nov 04, 2019 9:19 pm Thanks! What do you use for a tilt to large value, curious?

And aren't there 11 SPDR sector ETFs?
Hmm, you're right, went by what I saw in a PDF doing a quick search :oops:
I go the unconventional route and use a dividend fund (VYM mostly) for large value, but Paul Merriman has a good best in class ETF list: https://paulmerriman.com/best-in-class- ... hold-2019/

For US large value, the Vanguard fund he recommends is VONV, which currently only has 6.1% in tech: https://investor.vanguard.com/etf/profi ... folio/vonv
Oh, thank you! That could be a good possibility. I tend to play with individual tech stocks in my individual account, so perhaps I'll use this as a way to tilt AWAY from tech in my set and forget ETF portfolio?
Longtermgrowth
Posts: 727
Joined: Thu Nov 26, 2015 1:59 pm

Re: Equal weight sector ETFs with SCV tilt?

Post by Longtermgrowth »

mjuszczak wrote: Mon Nov 04, 2019 9:56 pm Oh, thank you! That could be a good possibility. I tend to play with individual tech stocks in my individual account, so perhaps I'll use this as a way to tilt AWAY from tech in my set and forget ETF portfolio?
Possibly, though hopefully the individual tech stocks are no more than 5% of your portfolio. That's the general recommendation for max amount of play money on Bogleheads. There's also usually a recommendation for a minimum of 10 to 20% fixed income even for younger investors, in addition to a healthy emergency fund.

I like what you came up with in your post above:
"50% VT
25% SLYV
15% DLS
10% DGS"

Keeps it simple and gives worldwide diversification with a decent size and value tilt.
Topic Author
manlymatt83
Posts: 314
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Re: Equal weight sector ETFs with SCV tilt?

Post by manlymatt83 »

Longtermgrowth wrote: Tue Nov 05, 2019 10:10 am
mjuszczak wrote: Mon Nov 04, 2019 9:56 pm Oh, thank you! That could be a good possibility. I tend to play with individual tech stocks in my individual account, so perhaps I'll use this as a way to tilt AWAY from tech in my set and forget ETF portfolio?
Possibly, though hopefully the individual tech stocks are no more than 5% of your portfolio. That's the general recommendation for max amount of play money on Bogleheads. There's also usually a recommendation for a minimum of 10 to 20% fixed income even for younger investors, in addition to a healthy emergency fund.

I like what you came up with in your post above:
"50% VT
25% SLYV
15% DLS
10% DGS"

Keeps it simple and gives worldwide diversification with a decent size and value tilt.
Can I sub some of the $VT allocation for $VFMF to keep myself interested? Maybe 10%?
rkhusky
Posts: 10909
Joined: Thu Aug 18, 2011 8:09 pm

Re: Equal weight sector ETFs with SCV tilt?

Post by rkhusky »

Keep in mind that the number of sectors is completely arbitrary. And there is quite a bit of subjectiveness in which companies belong in which category. There is therefore little justification for choosing anything other than the market weight for each sector. If one sector was horse and buggy technology, would you really want to equal-weight that?
Topic Author
manlymatt83
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Re: Equal weight sector ETFs with SCV tilt?

Post by manlymatt83 »

rkhusky wrote: Tue Nov 05, 2019 10:49 am Keep in mind that the number of sectors is completely arbitrary. And there is quite a bit of subjectiveness in which companies belong in which category. There is therefore little justification for choosing anything other than the market weight for each sector. If one sector was horse and buggy technology, would you really want to equal-weight that?
No. In hindsight I think I want to just not be so overweight in financials and tech.
Longtermgrowth
Posts: 727
Joined: Thu Nov 26, 2015 1:59 pm

Re: Equal weight sector ETFs with SCV tilt?

Post by Longtermgrowth »

Probably anything within that range is going to be a great portfolio if you stick with it after implementing. That's the problem with factor investing though, must be able to endure long periods of tracking error (not hard to endure when it's positive tracking haha) vs a plain vanilla index. It's a lifetime commitment!

Also, there are some new funds of interest to some here that may be a better option for small value, especially international developed markets (Avantis™ International Small Cap Value ETF - AVDV): viewtopic.php?t=284279
rkhusky
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Re: Equal weight sector ETFs with SCV tilt?

Post by rkhusky »

mjuszczak wrote: Tue Nov 05, 2019 10:51 am
rkhusky wrote: Tue Nov 05, 2019 10:49 am Keep in mind that the number of sectors is completely arbitrary. And there is quite a bit of subjectiveness in which companies belong in which category. There is therefore little justification for choosing anything other than the market weight for each sector. If one sector was horse and buggy technology, would you really want to equal-weight that?
No. In hindsight I think I want to just not be so overweight in financials and tech.
The market weight is the accepted weight. You want to be under-weight financials and tech.

Could be justified if your income depends on tech and financials. But it is more expensive to short, so you will need to decide if it’s worth it.
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