Variable asset allocation


We emphasize in our blogs that, over the long term, a properly selected U.S. index Exchange-Traded Fund (ETF), one that tracks the S & P 500, held in tax-advantaged account, has been the investor’s best way for growing savings and is likely to remain so for many years. Simple to set up, simple to manage, requiring attention of just few hours annually, the program will beat over 90% of portfolios including professionally managed ones. Who could ask for more?

More is possible. Possible, but the method comes with no guarantees. It is called variable asset allocation. We learned about it from the renowned dentist L. D. Pankey who made a great deal of money in the stock market.

There are more ETFs now than there are individual stocks. We can ignore them all except the ones which track of the S&P 500.

The best ETFs to track the S&P 500 are:

  1. iShares Core S&P 500 ETF (IVV)
  2. Vanguard S&P 500 ETF (VOO)
  3. SPDR S&P 500 ETF Trust (SPY)
  4. Schwab U.S. Large-Cap ETF (SCHX)
  5. iShares S&P 500 Growth ETF (IVW)
  6. Guggenheim S&P 500 Equal Weight ETF (symbol RSP)

The first five are market-cap-weighted. The sixth one is equal-weighted.

In line with their asset allocation, Monday Morning Millionaire Program members keep form 30% to 70% in one of these with the balance in a money market fund.

Any one of these would be fine.

It would be useful to review the concept of asset allocation here. Variable asset allocation places an increasingly greater percentage of portfolio cash into the market as it declines. Questions:

  1. How often do markets decline and to what extent do they decline?
  2. How much time do markets need to recover from a decline?
  3. How does variable asset allocation vary?
  4. Is the asset allocation different at different stages of life?
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Dr. Milan Somborac

The Monday Morning Millionaire Program supports do-it-yourself (DIY) investors which I have been for over 50 years. About my team and me