M1Finance: Design Your ETF/Share Your Pies

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aristotelian
Posts: 8942
Joined: Wed Jan 11, 2017 8:05 pm

M1Finance: Design Your ETF/Share Your Pies

Post by aristotelian »

I know a few Bogleheads have been using M1 Finance. I am curious to hear how people are using it (or considering using it), particularly when it comes to filling particular gaps in the ETF and/or replicating ETF's that currently have high expenses. I know some are already using M1 to access leveraged ETF's. I could imagine using it to replicate DFA or other managed ETF's that have appealed to Bogleheads.

I will start. There have been several threads asking for Zero Dividend ETF's to hold in taxable accounts for the ultimate tax efficient fund. As far as I am aware, nothing like that exists. It occurred to me that M1 would be the perfect platform to design one. Here is my effort at a Zero Dividend Large Cap Pie. I did screen for market cap >$30B and dividend <0.2%, then made a pie with back of napkin market weightings. My thinking is that risk due to loss of diversification could be offset by greater tax efficiency due to zero dividend and ability to harvest losses from individual positions. Behold the result:

https://m1.finance/JC2g-kwTu

According to M1, this pie has a dividend yield of 0.003%. I am not sure how I feel about GOOG and AMZN comprising 32% of the index. I am thinking a better approach might be to split the difference between market weight and equal weight and perhaps mandate each holding comprise at least 2% of the portfolio.

Curious to get feedback and also see what others are doing with this platform.
HEDGEFUNDIE
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Re: M1Finance: Design Your ETF/Share Your Pies

Post by HEDGEFUNDIE »

Nice job.

The other use case is reproducing active funds but not paying the ER.

One thing to keep in mind though. If you add new money on a regular basis the portfolio AA will not drift with market cap changes - the new money will automatically be deployed to bring you back to your original AA. Unless you are manually changing the AA with each injection of money, which is obviously tedious
Last edited by HEDGEFUNDIE on Mon Sep 30, 2019 9:23 am, edited 1 time in total.
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Forester
Posts: 1869
Joined: Sat Jan 19, 2019 2:50 pm
Location: UK

Re: M1Finance: Design Your ETF/Share Your Pies

Post by Forester »

I wish there was a platform like that in the UK.

The other thing that would be handy is an automated email which tells you when an ETF's composition has changed, maybe Morningstar or another site has that function.

Edit: relevant to this is Meb Faber's Invest With The House book, which studies portfolio cloning. https://www.amazon.com/Invest-House-Hac ... B01A3L1VEO
Topic Author
aristotelian
Posts: 8942
Joined: Wed Jan 11, 2017 8:05 pm

Re: M1Finance: Design Your ETF/Share Your Pies

Post by aristotelian »

HEDGEFUNDIE wrote: Mon Sep 30, 2019 9:17 am Nice job.

The other use case is reproducing active funds but not paying the ER.
Exactly. I would be curious to look at clones of DFA and the stock side of Wellesley as two examples that come to mind. I am sure there are others...
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