Monday, December 8, 2014

Vs Low cost ETF basket

This is my trading notebook, I am not an expert investor, so please do your own research.


I have been happy with the overall performance of Basket Cs. It is kind of a mixed bag, but when the Charles Schwab brokerage opened their own ETFs and made them free to trade, I started putting money into them, a bit at a time, usually on dips. The worst performing one for the day gets a little bit of money, 5 - 10 shares is common. I can do this because there is no commission. However, there are other brokerages that have ETFs that are free to trade. I think this makes a lot of sense. Paying more does not mean I get more. One of the things I want to concentrate on is Vanguard ETFs. They have a low overhead, sometimes even lower than Schwab, so if I can combine that with a low or non-existent commission, more of the money is focused on investing instead of paying brokerages and fund managers. And of course if there is a dividend, everything is really groovy.

Here is the practical application. Get a list of their ETFs.
If I had $50,000 to invest I could take the list of ETFs and divide $50,000 by the number of ETFs and try to invest about the same amount in each ETF. There is no requirement to actually do all of them, but it would be wise to make sure there are global focused ETFs and US focused ETFs. Then using the cost basis screen start tracking which ETF is getting hit the hardest and as money is available, buy another share. If I am patient, I can do most of this with limit orders and try to get that equity as cheaply as possible.

Would I consider mutual funds? I have a bias against mutual funds, however I would like to have some municipal bond coverage and I have not found an ETF that does that on Vanguard, so in that case I would.

Rules of the basket

  • Think maximum diversity, use equal starting investment dollar amounts when possible.
  • Limit orders for all buys, there is plenty of time and bull markets do not last forever, it is highly unlikely we will miss the bus forever.
  • If an ETF is getting clobbered take a close look, compare it to similar non-Vanguard ETFs and if they are tightly correlated consider adding to that position with an aggressive limit order. What goes down will likely come up over a long time horizon.
  • ETFs are preferred over mutual funds, but if we want coverage of a specialty area mutual funds are allowed.
  • This is an expansion on the Cs strategy, be very patient, fire bullets not cannon balls.
  • Taking a page out of the Ts strategy, money can be on the sidelines, but it should be tied to deep limit orders, at least 10% drop.

7/31/15 WFC 50 Limit @ 58, executed, VDE 100 Limit executed at 99.71, AAPL 100 Limit @ 122.00 executed, VWOB 25 Market 76.88.

4/30/15 Added to my VTC (health care) position.

3/3/15 VSS, (world small cap ex US) is the worst performing ETF of the system so I put in a limit at 98.00 Last Close 100.32.

2/27/15 Vanguard total stock ETF closed, the market was down a bit and it was enough to cause the limit to hit @ 109.00. I have three open orders as I try to fill out my portfolio:
VEU ( all world ex-US)
VXUS (total world)
VIS (industrials) Limit 100.00 Last Close 108.97 and it is up 5.5% in the past 30 days, but I think being patient for now is the right course of action.

Long term studies have shown the importance of investing outside of the US. Right now the US stock market is outperforming global, but changes will occur. The most important open order to me right now though is VIS, need to keep an eye on that one.

2/25/15 Closed my credit union account and mailed a check to Vanguard 2/18/15, but the winter weather has messed things up. However, according to USPS tracking it has left the post office and is in transit.

2/24/15 I had enough money left to open a minimum volatility mutual fund VMVFX. The thesis is this has been a long bull market run. It could end tomorrow, go on for another year, who knows. These are big stable stocks that historically do better in a down turn and capture most of the upside in a bull market. This is a defensive position and when I get some more cash, I hope to add to this position.  Last close 11.53.

2/23/15 VWOB executed @77.00 Last close 96.91

2/21/15 Existing open orders
VEU (All world ex US) Limit 48.00 Last Close (LC) 49.54
VTI (Total stock market) Limit 108.00 LC 109.28 2/23/15 changed limit to 109.00
VXUS (Total international stock) Limit 49.00 LC 51.18
VWOB (Emerging markets gov't bond) Limit 72.50 LC 77.20 Changed limit to 77.00
VIS (Industrials) Limit 100 LC 109.90 52 week  92.90 - 109.91 Hold
New order
VNQ (Reit) Limit 83.25 LC 84.61

2/20/15 VDE (energy) closed, 113.00

2/18/15 VGK (FTSE Europe) closed, 59.09.

2/17/15 BNDX closed, so did EDV.

New position, time to play Europe assuming a limit will hit.
VGK 370 Limit 54.70 Last close 54.96

2/11/15 Limit close on EDV 129.73 Last close 129.75

Open Limits:
VTV (Value) Limit 78.50 Last close 84.38 Up 4% over past five days, consider sweetening the bid.
VWOB (Emerging markets bond) Limit 72.50 Last close 76.51 Down .39% over past five days, wait
VIS (Industrials) Limit 100.00 Last close 106.39 Up 3.62% over past five days

New limits:
BNDX (International bond), Limit 53.60 Last close 53.63
VXUS ( International stock ), Limit 49.00 Last close 49.34
VTI (Total stock), Limit 106.90 Last close 106.93

2/9/15 Limit close on VPU bought at $100.00 2/11/15 close 99.88

1/30/15 Apparently I have been sloppy with my documentation in this basket. I just got some trade confirmations and no discussion of the setup of the trade. Will recover to the best of my ability. The confirms are for:
VDC (consumer staples) closed at 124.00 Last close 123.44
VIG (dividend appreciation) executed at 78.50 Last close 78.42

Set a limit for VTV (Large cap value), VDU (utilities)
VTV Limit 78.50 Last close 81.03
VDU Limit 100    Last close 104.58

1/10/15 Energy positions have been trashed and I think it is time to buy. The Vanguard ETF for this is VDE. Don't want to pay too much so we will use a limit:
VDE 200 Limit@104.00 Last close 107.96 Good till canceled

4/23/14 An account is now set up and ready and funds have been received, so it is time to start.
Equity US, Regional International

70 MGC M@56.42 (mega cap)
55 MGK M@72.83 (mega cap growth)
70 MGV M@56.42 (mega cap value)
17 VO M@112.68 (mid cap)
20 VSS M@107.88 (small cap, global ex-us)
18 VB M@111.38 (small cap US)

Low Volatility
50 VMBS M@ 51.97 (mortgage backed, low volatility, slow growth)

Sector Specific
20 VCR L 104.00 L 104.93 (consumer discretionary)
20 VOX L@82.5 L 83.17 (telecommunications)

Bond ETFs
25 BND L@81.4 L 81.49 (total bond)

1/8/15 Global
Obviously the US outperformed most of the world in 2014, but I want a wider exposure, despite what happened in France today, there is more good news than bad news. I am going to start with a wide net and pickup VTWSX which is total stock.