Hello.
I’ve begun using an equal sector approach for my domestic allocation. Searching the forums I find a couple of references to people intrigued by the idea but I didn’t find anyone reporting on results or their experience with it. I'm hoping some of you who've given it a go will comment.
Briefly here is how I’m implementing it and why it appeals to me … not everyone’s cup of tea I fully understand:
* Deploy my US equity allocation equally through the 11 sector ETFs (I use F* with an expense ratio of 0.084% and free trades … slightly cheaper than V* curiously enough)
* Use a 5% band approach for rebalancing (sell 2.5% of top sector ETF and buy the lowest anytime the difference hits 5%). I’m still accumulating but when I start withdrawing selling a bit of the winners will replenish short term reserves.
* I know that might sound excessive or needlessly involved but it satisfies my ‘itchy trading finger’ to ‘do something’ in a systematic way rather than fighting my instinct to want to tinker (I'm doing this in a pre-tax fund)
* My impulse is always to want to take profits and buy whatever is taking a hit so this approach is more natural to me than letting things ride
* The value and mid-cap tilt appeals to me over a market cap index
* I could just buy EQL and forget it but the 0.3% expense ratio for indexing doesn’t appeal
* I know from experience I have no ability to time markets so I’d rather just buy a little of everything and rebalance systematically
* I’m not expecting magic here. I just think it could give me a fraction of a percent more return at slightly lower risk based on backtesting. If we are indeed entering a low-return environment for an extended period this edge could make a real difference.
I have one IRA that I’ll devote exclusively to this approach so it will be easy to benchmark performance against SPY, EQL, and RSP. If it goes well I’ll share the results