Any ideas on investing in sectors that:
a) have some momentum, but still some room left for growth or
b) are undervalued and overdue?
Thanks in advance!
This is a bad idea if you intend to follow the advice in this thread.
I’m not saying there aren’t knowledgable people here, I’m sure there are some, but your question is so vague that it’s practically like you’re begging for mr. hot stock tip giver to come in here with his inside information from his brother in laws sisters fourth cousins stepfather (on his mothers side).
I mean, oil still has momentum and room left for growth, depending on how you look at it. You should try and be more detailed as to what you want to talk about or else you’re not going to get any good responses (like this one).
Yes, indeed, the question was rather vague.
I’m currently 100% cash. I basically want to apply the Swensen (Yale) portfolio model, +/- 20% each:
US Stocks = VTI,SPY
REITS = VNQ, IYR
Foreign Stocks = EFA
Commodities = GSP, DBC
US Govt. Bonds = AGG
but I am not willing to be fully invested, and I am not sure for the first 20%. I think that the real estate and US market has had some runup, but I am not sure if there is some momentum left.
EFA (iShares MSCI EAFE Index) would thus be the default choice. Just wondering if I’m missing something here, like Emerging Markets, or some beatup sector in which I could allocate ‘crazy money’ (5%, max, of my portolio).
Dweezil’s right on the money with this. Since you’re interested in sectors, though, there is a little something that might help. Pick up an issue of Barron’s when it comes out on Saturday and open it up to the Market Laboratory section. In it you’ll find a weekly ranking of sectors, w/ both this year’s ranking up 'til now and last year’s final ranking. From there, you’ll have a quick snapshot of the the strongest and the weakest.
If, for instance, XYZ sector was ranked 95th last year and is 95th again this year, then it MIGHT be a bottom fishing candidate, since it most likely won’t stay down forever.
Conversely, you can also use the rankings to try to ascertain sectors that are strong enough to follow through further, but not so strong as to be overextended and ready for top. Then do your due diligence from there. Hope this helps.
[quote]MrChill wrote:
Yes, indeed, the question was rather vague.
I’m currently 100% cash. I basically want to apply the Swensen (Yale) portfolio model, +/- 20% each:
US Stocks = VTI,SPY
REITS = VNQ, IYR
Foreign Stocks = EFA
Commodities = GSP, DBC
US Govt. Bonds = AGG
but I am not willing to be fully invested, and I am not sure for the first 20%. I think that the real estate and US market has had some runup, but I am not sure if there is some momentum left.
EFA (iShares MSCI EAFE Index) would thus be the default choice. Just wondering if I’m missing something here, like Emerging Markets, or some beatup sector in which I could allocate ‘crazy money’ (5%, max, of my portolio).[/quote]
I’m not a fan of the Swensen model. Well, no, that’s not true. I guess it depends on the application of it. They certainly have their guidelines, but as far as commodities and foreign stocks go commonly novices deviate and select very specific investments, which is only something experts should do- and even then, experts are idiots.
I should say that I’m not a fan of the David Swensen model because I think user error is not accounted for. For retirement, it’s just not correct. For someone who’s a passive investor, it’s horrible. Most people aren’t very intelligent about this, and I’ve always felt that multi asset investing has pitfalls, unless you’re very broad in your allocation of each branch of your portfolio.
You need to mix and max foreign growth funds and holdings in commodities to not put yourself in a tremendous amount of risk with that segment of your portfolio.
I think you have a slightly misguided understanding of our market. There’s always momentum, it depends on the market segment. You’ll always see sufficient growth. It’s incredibly stable compared to most foreign markets, and that is what makes it so that (in my opinion) your very first market investments should be in US funds. For looking at index vs ETFs, I’d suggest you read this: ETFs vs. Index Mutual Funds: What's the Difference? , as I’m not a fan of giving people direct instructions online as to what they should do precisely (and you shouldn’t be a fan of receiving that advice).
If you’re going to invest in foreign ETFs, you have to use the top-down method, because you’re not going to have the information other people have (or the time to process it).
The best general instructions I can give you are to invest in this order:
US Stocks, Foreign Stocks, Bonds, Commodities, REITS.
Obviously gold does well in recessions (I doubt we’ll fall into one, but the US dollar still has issues and real estate is going to be in the current downswing for a minimum of 2 years), but if you put all your commodity money in precious metals (which everyone does, what the fuck?) you’re asking for that part of your portfolio to suicide.