Quote:
Originally Posted by woj
If you have no idea what you are doing, something like this would be a good starting point:
http://us.ishares.com/product_info/f...erview/TZO.htm
though I would buy the same index funds myself and save myself 0.25% per year... and perhaps buy vanguard equivalents of these fund, they often have lower fees too...
BUT if you are not very familiar with the whole terminology, don't have time, interest, etc to deal with it, just buy TZO and don't worry about it too much, if you go to Charles Schwab or some other full service broker, they will trick you into some funds with 2% annual fee... |
That fund isn't nearly diversified as it appears on the surface.
Here's the 5 year chart comparing IVV (48%) and EFA(18%), which make up 66% of the fund.
http://www.google.com//finance?chdnp...YSE:EFA&ntsp=0
They've had pretty much the same movement because one tracks the S&P 500 (the most accurate US Index) and the other tracks Western Europe and Japan - markets which have historically followed Wall St.
Skip AGG for a second, and add IJR (7%) and IJH (6%), which is small cap and mid cap. They slightly outperform the larger indexes, as they should both during and coming out of a recession, but they make up only 13% of the fund
http://www.google.com//finance?chdnp...YSE:EFA&ntsp=0
Of the two remaining holding that are somewhat substantial, you have EEM (which I recommended several posts earlier) at 4% of the fund and AGG at 12%. Emerging Markets and Municipal Bonds. The bond fund is pretty much flat of course, and the emerging market has been a bit schizo, but has still outperformed the bonds to the tune of 44% to 6% over the past decade.
http://www.google.com//finance?chdnp...YSE:EEM&ntsp=0
If you're of the belief that bonds will continue to perform with minimal growth or just be flat, they kind of serve as the stabilizing force of the fund. If you believe that bonds are the next shoe to drop, as Meredith Whitney does, you'd be kind of fucked because IVV would follow and then EFA and the two others would soon follow.
Here's the search results for Meredith Whitney and Bonds.
http://tiny.cc/be5cg
It really is just best to go with EEM.
http://us.ishares.com/product_info/f...rview/EEM.html
Especially because of the ability to write covered calls on it within the confines of an IRA where you don't have to worry about the capital gains hit that would otherwise come if you get called out.
With 800 shares of EEM (about $40K), you could write 4 $52 Strike and 4 $51 Strike
contracts with a June Expiry and pocket $600 after commissions. Do that 6x per year and you'll make 9% even if the price per share remains the same and if it goes down,you've built yourself a 9% cushion.