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Diversifying a DGI Portfolio
#1
Thought I'd start a discussion on Diversifying a DGI Portfolio.

What measures do you use to diversify your portfolio?

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I found these two tools that allow you to play with various ratios for optimal gains:

Fidelity Sector Portfolio Builder

SPDR Portfolio Builder

Using these two services I have tuned our portfolio to the following ratios:

Sensitive
Energy 5%
Energy MLP's 5%
Industrials 10%
Technology 10%
Communication Services 5%

Cyclical
Basic Materials 5%
Consumer Cyclical 5%
Financial Services 15%
(Financial Services includes)BDC's 2%; Banks/Ins 5%; REITs 4%; Health REITs 4%

Defensive
Consumer Defensive 17%
Health Care 10%
Utilities 10%

Speculative
Company Stock 3%

Sorry if this doesn't format correctly.

Right now this works for us. Using Excel spreadsheet to monitor. Maybe we should have a Spreadsheet Section at our forum with tips and tricks plus downloads???

Cheers,

Rob
There are people who use up their entire lives making money so they can enjoy the lives they have entirely used up
Frederick Buechner
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#2
Thanks for sharing the two tools, and your breakdown. This will help me in putting my investment plan together. I've been in the "Ready - Fire - Aim" mode for past year.
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#3
Rob, I struggle with that also. Part of my plan is to have at least one holding in each of the S&P/GICS 10 industry classifications. I'm short in the Basic Materials sector and cannot settle on which ones to look at -- mining? chemicals? plastics? wood products?

I like your allocations although 15% in Financial Services seems a couple percent higher than I think prudent. Then I look at my portfolio and see I've done the same thing. Confused Those yields do seem nice.

I'm guessing that you're spread out enough, and knowledgeable enough, that actual percentages, even if a few off your goal, are not going to hurt you.
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#4
Shocked 
I think what you have is fine.

In my opinion the best way to diversify a DGI portfolio is to include other asset classes like bonds. I am a big fan of DGI but I do not have the stomach for 100% stocksBig Grin
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#5
(02-04-2014, 12:02 AM)Dexter Wrote: I think what you have is fine.

In my opinion the best way to diversify a DGI portfolio is to include other asset classes like bonds. I am a big fan of DGI but I do not have the stomach for 100% stocksBig Grin


Dexter, I'm just the opposite. After losing a large percentage of principal in long-term bond mutual funds in the 80's, I just cannot justify in my mind buying bond funds ever again. This was during a period of slowly dropping rates so you would logically think I should've at least broke even.

Right now I'm 96% in the market and, with the KO trade this morning, my wife has less than $5 cash in her account.
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How do they get the deer to cross at that yellow road sign?

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#6
(02-04-2014, 12:15 AM)Dividend Watcher Wrote:
(02-04-2014, 12:02 AM)Dexter Wrote: I think what you have is fine.

In my opinion the best way to diversify a DGI portfolio is to include other asset classes like bonds. I am a big fan of DGI but I do not have the stomach for 100% stocksBig Grin


Dexter, I'm just the opposite. After losing a large percentage of principal in long-term bond mutual funds in the 80's, I just cannot justify in my mind buying bond funds ever again. This was during a period of slowly dropping rates so you would logically think I should've at least broke even.

Right now I'm 96% in the market and, with the KO trade this morning, my wife has less than $5 cash in her account.

Yikes, with dropping rates wouldn't the bond funds increase in value?

Note my bond funds took a huge hit last year, but most recovered. My TLT position is finally in the green again.
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#7
(02-04-2014, 12:18 AM)Dexter Wrote: Yikes, with dropping rates wouldn't the bond funds increase in value?

You would think so. Of course, back then fund management fees were a little higher than today. Also, I'm sure than managers were churning the account positioning the portfolio as rates changed. I don't remember all the details. All I know is that after a couple years of reinvesting, I didn't come out ahead and I swore off bonds -- especially long-term bonds.
=====
How do they get the deer to cross at that yellow road sign?

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#8
(02-03-2014, 08:17 AM)Robandcindy2 Wrote: Thought I'd start a discussion on Diversifying a DGI Portfolio.

What measures do you use to diversify your portfolio?

*******************************************
I found these two tools that allow you to play with various ratios for optimal gains:

Fidelity Sector Portfolio Builder

SPDR Portfolio Builder

Using these two services I have tuned our portfolio to the following ratios:

Sensitive
Energy 5%
Energy MLP's 5%
Industrials 10%
Technology 10%
Communication Services 5%

Cyclical
Basic Materials 5%
Consumer Cyclical 5%
Financial Services 15%
(Financial Services includes)BDC's 2%; Banks/Ins 5%; REITs 4%; Health REITs 4%

Defensive
Consumer Defensive 17%
Health Care 10%
Utilities 10%

Speculative
Company Stock 3%

Sorry if this doesn't format correctly.

Right now this works for us. Using Excel spreadsheet to monitor. Maybe we should have a Spreadsheet Section at our forum with tips and tricks plus downloads???

Cheers,

Rob

And just to clarify, this is just how I allocate our stock holdings. We also hold various bond funds (loosely following Rick Ferri's bond diversification) and equity mutual funds/ETFs (because of the structure of our 401K). I do use, and have included in the above ratios, "sector specific" ETF's to assist in diversification where the yield and cost index are favorable in my view.

Regarding equity mutual funds/ETFs: These I make an attempt to diversify our portfolio through the Large, Mid, Small criteria as well. Bond funds are diversified through short, intermediate, long, high yield, international.

I also attempt to track all of our holdings (equities & fixed) with regard to Foreign and Emerging markets.

Hey! A guy needs a hobby when it's too cold to play softball! Big Grin
There are people who use up their entire lives making money so they can enjoy the lives they have entirely used up
Frederick Buechner
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#9
Wow that is super impressive. I should probably put more work into diversifying properly!
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