What index style ETFs have you uncovered in your research that you might recommend?
Has anyone had any success or warnings with some of the more exotic leveraged holding ETFs?
I'd be cautious with the more exotic leveraged ETF. Instead, for my non-investment accounts I've been mostly holding the Mag 7 since last year (after rotating out of pandemic stocks following the rebound). I shared my results over the last couple of years on by blog where I document my thinking for future reference/improvement (https://gmays.com/2-year-follow-up-on-buying-the-dip-on-pand...). My current IRR from that portfolio is 83.70% over the last couple years for context.
The 5-year and 10-year for both under-perform QQQ & SPY
This is a basic tenant of Boglehead. Chasing returns usually means you "buy high, sell low".
The whole point of index investing is to be boring.
More aggressively, VIOV and VBR target "Small Cap" "Value", stocks, 1 - 2% of the total market that are smaller companies with more low-growth prospects. There is academic research to suggest that there may be some higher-risk but even-more-high-reward for these type of stocks that is consistently underpriced by the so-called "efficient market hypothesis."
This is a backtest from 1972 where $10k in Total Market (~VTI) and Small Cap Value stocks were bought and Small Cap Value ended with $7.5m against Total Market $2m, while retaining better Sharpe and Sortino ratios.
https://www.portfoliovisualizer.com/backtest-asset-class-all...
That is only for those who could commit long term with conviction of their research and understanding, as there are periods of 10-15 years you could underperform Total Market: https://www.portfoliovisualizer.com/backtest-portfolio?s=y&s...
Avantis' funds are index-like in that they pick stocks by screening the universe of market-cap-weighted stocks using factor-based screens, rather than active management. Their algorithms use profitability, volatility, size, and value as factors, and mix in the momentum factor (basically, stocks that go in one direction tend to move that way for a bit) to time trades.
The international counterpart is AVDV, and they have a whole range of funds for emerging markets and so on.
Avantis was founded by ex-Dimensional (DFA) people and their methodology is similar to that of the famous high-end mutual funds run by DFA. (Of course, DFA also has ETFs now.)
Avantis: "this fund is an actively managed ETF that does not seek to replicate the performance of a specified index."
Indexes like the S&P 600 (which VIOV follows) use similar screens for value and profitability and so on, and could be said to be "actively managed" [1]. Don't forget that indexes are typically "actively managed" as well. The S&P 500 is an example of an index that is essentially a human-curated list set up by committee. It's not the top 500 companies on VTSAX/VTI.
But indexes have a big downside in they they're not rebalanced so often. Avantis' funds can rebalance constantly (usually daily) based on their quantitative models.
I try to maintain some arbitrary split between the two, but I do not have a ton of faith in Int. overtaking the US market anytime soon, but I am often wrong about most things, so that's why I ignore my gut feelings.
It may be slightly suboptimal. I don't know.
=> while was working full time and had income I've sold all stock that got from the employee and put into VTSAX.
Living from these money for the past few years in the Bay Area.
Otherwise, I stick with the classic QQQ for long term holdings and have some fun with the VIX when I want to gamble a bit more.
Thanks for the pointer on semiconductors.
That's the way I've been doing it since years.
I wanted to diversify so I got plenty of US, some India and China, , Silicon, Water, Clean Energy.
The stock market no longer meets the requirements to be considered an investment, using Benjamin Graham's definitions. While it seems like it has no where to go up, this is an illusion, and most of the smart money has diversified or left the stock market completely.
Rule number one of investing is, don't lose your principal. The market has for almost 3 years now, been approaching irrational exuberance indicating it may be at the top of an everything bubble.
There is no visibility on the leverage, and updates to the valuation of an ETF more likely than not will not follow even the underlying portfolio valuation.
For a perfect example, thanks to the YTM loophole in reporting, the main ETF that follows bonds didn't see a severe correction (to the downward valuation) while interest rates were going up despite the fact that the underlying of the fund lost 1/3rd of its value almost overnight using standard financial math valuation for bonds in changing interest rates. The higher interest rates being offered by the Fed dropped the price of all existing, for the underlying, and at the time it was roughly 99% US 30Y bonds iirc at 1.5%. The ETF traded at 115 per share. 2 years later in a 4.5% available bond, it had only dropped to 108/share. Despite book value of the underlying having lost significant value, they claim its updated daily based on market conditions, but they follow the YTM loophole to avoid marking to market the underlying; along similar dirty lines as the Libor rate scandals.
Additionally, there is no visibility, or for that matter safeguard against someone crashing your investment and stealing your money through options. Many of the entities involved are tangentially related to middlemen who have the exclusion for creating synthetic shares (out of nothing).
I'm sure you've seen some of the GME stuff that's been going on over the years, the functional component is options, that may be pushed out in perpetuity. The fact that the underlying aggregate is shorted more than the shares in existence, should cause a short squeeze normally. That would normally cause the price to go up in a short squeeze, but when you can create synthetic shares into existence that doesn't happen and they capture the profit both ways, while tamping down the squeeze. Any big player can utilize PFOF, and yield farming to steal your money.
Invest in something tangible, with cashflow, where you've done the research.
There are just too many ways for you to lose everything from bad actors in the stock market, and the SEC is helpless to go after the people involved since its a systemic problem at the top, it is a captive system, where putting you money into it is volunteering for it to be stolen; with the hope that you'll make some money, and the fear that you'll miss out.
I fully expect 20+ trillion $ companies by the end of this decade.
There are boundaries on how much you can inflate before it causes cascade failures at a societal level. We've already hit a number of them, and stagflation indicators we have already seen will force interest rates low very soon, but at the same time balloon hyperinflation because the deficit spending rate and interest on old debt exceeds growth (GDP annually).
Being dependent on foreign goods due to systemic lack of local manufacturing creates similar conditions as previously seen in the Weimar Republic.
Ray Dalio's Bridgewater Associates wrote a report and case study called Big Debt Crises. They make the argument for beautiful deleveraging but their conclusion about that neglects boundary conditions imposed by producers, and consumers in concentrated markets.
The aggregated data in this report makes a sound argument against the conclusion that you can print indefinitely.
Its a matter of what breaks first, producers or consumers. At the point consumers can't get food, unrest occurs violently, this prompts stockpiling, shortages ensue and self-sustain. Economic collapse is not that long after.
"Investing Basics - How Dumb Money can become Smart Money", https://www.investopedia.com/investing/surprising-benefits-w...
That said, I don't recommend investing in the stock market for the reasons I previously mentioned.
You nearly always see buying sprees towards real assets when there are bubbles that are about to pop.
Whether that spree is in terms of buying companies (for cash flow), or real assets like real estate, mines, etc (i.e. blackrock buying up large swathes of housing, and engaging in acts that might be construed as price fixing rents; i.e. constraining supply letting housing they've purchased remain vacant) etc.
You follow the money, and pay attention to the upstream, actually productive companies that are inputs to the other companies.
Price can remain the same, or drop slightly when there are outflow trends. Those outflows can also be laundered as option contracts, which may prop up the underlying until the expiration. Many, probably even most, of the companies today on the Russel, and 500 are zombified. Cascade failures in inputs, from a credit or liquidity crunch are common and predictably worse for any company carrying high leverage ratios (which are most).
I got started by following YC startup school videos.
The first one I did was creating an app for a high society maid service in the UK.
Is this more of a consultancy?