First Investments using ETFs

**Petunia 100** · 01-24-2013, 05:10 PM

Originally posted by hellooperator View Post

Did anyone have any good recommendations out of the following list to start investing with?

Barclays Aggregate (AGG
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Barclays TIPS (TIP
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Dow Jones International Select Dividend (IDV
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Dow Jones Select Dividend (DVY
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Dow Jones U.S. Real
Estate (IYR
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iBoxx $ Investment Grade Corporate (LQD
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iBoxx High Yield Corporate Bond (HYG
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JP Morgan USD Emerging Markets (EMB
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MSCI ACWI (ACWI
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MSCI ACWI ex U.S. (ACWX
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MSCI EAFE (EFA
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MSCI EAFE Small-Cap (SCZ
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MSCI Emerging Markets (EEM
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Russell 1000 (IWB
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Russell 1000 Growth (IWF
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Russell 1000 Value (IWD
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Russell 2000 (IWM
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Russell 2000 Growth (IWO
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Russell 2000 Value (IWN
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Russell 3000 (IWV)

S&P 500 (IVV
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S&P 500 Growth (IVW
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S&P 500 Value (IVE
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S&P Mid-Cap 400 (IJH
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S&P Mid-Cap 400 Growth (IJK
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S&P Mid-Cap 400 Value (IJJ
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S&P National AMT-Free Municipal (MUB
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S&P Small-Cap 600 (IJR
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S&P Small-Cap 600 Growth (IJT
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S&P Small-Cap 600
Value (IJS)

I get to trade those free (as many times as I want) so I was looking for any thought behind which ones people here might recommend (if any!)

Thanks!

Those are all fine choices, but you certainly don't need all of them as there is a great deal of overlap. In general, you want to own the entire US stock market, the entire international markets, and the entire US bond market. Some prefer to keep it just that simple. Some prefer to "slice and dice" the market, some prefer to tilt.

How old are you? What is your time horizon? How comfortable are you with taking on risk? Do you have access to other EFTs as well, or are these it?

Just for giggles, here is my target asset allocation:

25% Total US Market
10% Small Value
10% Reits

15% Large Developed Intl Markets
5% Small Intl
5% Emerging Markets

15% Total Bond Market
15% Tips

I am 45. I intend to stay put for now, and around age 60 switch to:

30% Total US Market
10% Reits

20% Total Intl

20% Total Bond Market
20% Tips

If I were 20 years younger, I'd be more like this:

30% Total US Market
10% Small Value
10% Reits

15% Large Developed Intl Markets
7.5% Small Intl
7.5% Emerging Markets

10% Total Bond Market
10% Tips

**kv968** · 01-25-2013, 06:59 AM

Originally posted by creditboosting

Actually I have invested in ETFs for years and I can name some really risky but profitable ETFs.
UYM (2x beta in basic materials, purchase this stock at around 30-33)
EDC (3x beta on the growth of rising economies such as Thailand and other smaller economies)
FAS (3x beta in the growth of the financial industry such as banks)

I like these three stocks a lot because they are risky but they are less risky than investing in a single company where the swings can be huge such as Apple today. You are investing in an entire industry.

It depends on what you consider "risky".

Leveraged ETF's can be very risky even though you're investing in an entire industry. EDC, FAS and UYM have 3-yr. standard deviations of 73%, 60% and 51%, respectively whereas their underlying indexes have deviations in the low 20%'s and Apple's (as per your example) is ~34%. That sounds pretty risky to me. Granted you're not investing in a single company which would make you more diversified, but there's still plenty of risk to be had in leveraged ETF's.

And with the way they're constructed, they really aren't meant to be long-term holdings but more shorter-term trading vehicles.

First Investments using ETFs