IRA asset allocation in 2006
So in 2006, I'm switching over to a predominantly Exchange Traded Funds (ETFs) alignment for the IRAs.
|
Basic Strategy
Diversification - IRA accounts (not taxable) |
|||
|
|
|
|
|
|
45% |
Domestic
Stock Funds (with Market Timing, in and out of Money Market fund) |
||
|
40% |
International
Stock Funds |
|
|
|
5% |
Gold |
|
|
|
5% |
REIT |
|
|
|
5% |
Commodities
Derivative |
|
|
|
% |
Category |
Fund Name (ticker) |
Notes |
|
11.25% |
U.S.
Large Cap Stocks Growth |
0.2% expense
ratio |
|
|
11.25% |
U.S.
Large Cap Stocks Value |
0.2%
expense ratio |
|
|
11.25% |
U.S.
Small Cap Growth |
0.25%
expense ratio |
|
|
11.25% |
U.S.
Small Cap Value |
0.25%
expense ratio |
|
|
|
cash |
Schwab
Value Advantage Money Fund� � Investor Shares (SWVXX) |
�3.77% as of Jan '06 |
|
9.00% |
Int'l
Large Cap Growth |
0.4%
expense ratio |
|
|
9.00% |
Int'l
Large Cap Value |
0.4%
expense ratio |
|
|
4.00% |
Latin
America fund |
0.5% expense
ratio |
|
|
4.00% |
South
Africa Fund |
0.74%
expense ratio |
|
|
4.00% |
India
Fund |
01.64%
expense ratio |
|
|
10.00% |
Int'l
Diversified Emerging Markets |
0.77%
expense ratio |
|
|
|
|
|
|
|
5.00% |
Gold |
0.4%
expense ratio |
|
|
5.00% |
REIT |
0.26%
expense ratio |
|
|
5.00% |
Commodities
Derivatives |
After
Reading Jim Rogers' book, wanted some exposure to commodities, particularly
in IRA |
|
|
100% |
|
|
|
(More on commodities derivatives on another page)
The total 'weighted expense ratio' (expense ratio of each fund times the weight in portfolio, summed) is 0.37%.
The domestic offerings seem to be �right on� with the asset allocation strategy I�m trying to follow. They are tightly defined, and the expense ratios are much better than what I saw with Mutual Funds. Best of all, the trading cost is a stable $12.95 per trade at Schwab, so I won�t have undue �friction� stopping me from taking advantage of re-balancing.
The international offerings are a mixed bag. EFG and EFV are perfect for hitting the upper corners of the style box, but I haven�t found anything that targets the lower corners (Small Cap Value & Small Cap Growth). Admittedly, this was a tricky one to shop for in mutual funds as well. EEM has Diversified Emerging Markets targeted well. I threw in ILF to increase exposure to that part of the world as it�s �hot� right now and not well served by those other funds. I threw in an India fund like IFN for similar reasons, as I did EZA for South Africa.
I expect that given time, new ETFs will emerge that serve those �small corners� of the international style box. I�ll keep my eyes open for them.
In Radical Guide�s chapter - Why Use Closed-End Funds?, they point out that fund arbitrage in international funds is still a problem, and they suggest using closed-end ETFs to counter it. I haven�t gone there yet. Limiting yourself to closed-end funds restricts the choices even further.
Send e-mail to: Todd <todd@thepeaches.com>