Blanket Equity Coverage Through ETFs
Exchange Traded Funds are a liquid investing tool. Costs per 10,000 dollars index funds are extremely low. Portfolio construction will play the entire U.S. market, and a sweeping international option. Turbulence in the global equity markets has investors reviewing their portfolios. Retail investors subscribe to the belief that the best way to minimize losses is diversity and low fees. I’d like to review my personal holdings with you, as an option for investors seeking a diversified foundation of funds which all have low fees. I invest in the 5 ETFs, with minor overlap, and allocate 20% to each. Holding these index funds will allow you to have sweeping coverage of the U.S. market, including a broad international fund. Vanguard Total Stock Market ETF (NYSEARCA: VTI ) ” The Fund employs an indexing investment approach designed to track the performance of the CRSP US Total Market Index, which represents approximately 100% of the investable U.S. stock market and includes large-, mid-, small-, and micro-cap stocks regularly traded on the New York Stock Exchange and Nasdaq. The Fund invests by sampling the Index, meaning that it holds a broadly diversified collection of securities that, in the aggregate, approximates the full Index in terms of key characteristics. These key characteristics include industry weightings and market capitalization, as well as certain financial measures, such as price/earnings ratio and dividend yield.” Fee – .05% annually. VTI allows investors access to 3,816 stocks of all market caps, and has outperformed the S&P since 2005. Vanguard Small-Cap Growth ETF (NYSEARCA: VBK ) ” The Fund employs an indexing investment approach designed to track the performance of the CRSP US Small Cap Growth Index, a broadly diversified index of growth stocks of small U.S. companies. The Fund attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the Index, holding each stock in approximately the same proportion as its weighting in the Index.” Fee – .09% annually. Hunting for news on small companies can be can be difficult. This fund gives investors access to this market through a basket of 738 small cap stocks. Vanguard Mid-Cap ETF (NYSEARCA: VO ) “The Fund employs an indexing investment approach designed to track the performance of the CRSP US Mid Cap Index, a broadly diversified index of stocks of mid-size U.S. companies. The Fund attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the Index, holding each stock in approximately the same proportion as its weighting in the Index.” Fee – .09% annually. Reinforcing your base position in mid-caps through VTI, this is where the high flying stocks are located. The index again protects investors against massive losers, while benefiting from the high fliers. This fund has 369 stocks between 2-10 billion market cap in its portfolio. Vanguard Mega Cap Growth ETF (NYSEARCA: MGK ) ” The Fund employs an indexing investment approach designed to track the performance of the CRSP US Mega Cap Growth Index, which represents the growth companies, as determined by the index sponsor, of the CRSP US Mega Cap Index. The Index is a float-adjusted, market-capitalization-weighted index designed to measure equity market performance of mega-capitalization growth stocks in the United States. The Fund attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the Index, holding each stock in approximately the same proportion as its weighting in the Index.” Fee – .11% annually. This fund has 150 stocks and contains the big blue chips over 200 billion in market cap. Vanguard Total International Stock ETF (NASDAQ: VXUS ) ” The Fund employs an indexing investment approach designed to track the performance of the FTSE Global All Cap ex US Index, a float-adjusted market-capitalization-weighted index designed to measure equity market performance of companies located in developed and emerging markets, excluding the United States. The Index includes approximately 5,550 stocks of companies located in 46 countries. As of October 31, 2014, the largest markets covered in the Index were Japan, the United Kingdom, Canada, Switzerland, and France (which made up approximately 16%, 15%, 7%, 6%, and 6%, respectively, of the Index’s market capitalization). The Fund invests all, or substantially all, of its assets in the common stocks included in its target index.” Fees – .14% annually. An all in one stop for your international exposure. This fund employs roughly 60% of its assets into industrialized nations, the rest into emerging markets. This portfolio construction will give investors sweeping coverage of the United States, and minor exposure into the international markets. If you’re rebalancing your portfolio, this may be a good place to start. From this portfolio, investors can begin adding individual stocks and sector based ETFs to compliment. Investors being hurt in these multiday declines should consider redesigning their portfolio construction. Begin with these ETFs, branch off slowly, and this recovery will be more than breaking even. Disclosure: I am/we are long MGK, VO, VTI, VXUS, VBK. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.