DIY investing, what do I need to create my own index fund and passive manage? [Mexico]

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Beensabu
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Re: DIY investing, what do I need to create my own index fund and passive manage?

Post by Beensabu »

geshiro wrote: Sat Oct 16, 2021 4:11 pm how do I outperform my own asset allocation versus BlackRock aggressive ETF or keeping the same margin?
Nobody can tell you how to do this.

Nobody knows how any particular portfolio is going to perform in the future.

We just try our best to manage all the different risks involved according to our own personal risk tolerance and the weight we individually assign (consciously or unconsciously) to those various risks.

Once again, here are two "links of links":

Asset Allocation: https://www.bogleheads.org/wiki/Categor ... allocation

Portfolio Risk Management: https://www.bogleheads.org/wiki/Categor ... management

Read it all. Then you'll understand that nobody can give you the answer you're looking for.

What you are trying to do may be possible. But we don't know how, just like you don't know how. Later, we'll be able to look back and say "this was how". But right now, we can't do it, because it hasn't happened yet. And later, we still won't know how for the future.

If you want to replicate the performance of the S&P 500, you go with a S&P 500 index fund. Then you get that performance minus fees. The fees of most S&P 500 funds are negligible.

If you want to replicate the performance of FTSE Global All Cap ex US Index, you go with a fund that tracks that index.

If you want to replicate the performance of literally any index that is out there, then you go with a fund that tracks that index.

---

You know, I think maybe I have finally figured out what you are actually asking in your OP.

Maybe you are trying to figure out how to create your own benchmark (one that is not currently in existence as an index) that you can then track your portfolio against. If that's the case, then you can use existing funds that are in the "category" of whatever you hold in your portfolio at the same weights as your actual allocations to those "categories".
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
fwellimort
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Re: DIY investing, what do I need to create my own index fund and passive manage?

Post by fwellimort »

Maybe OP means something like:
https://www.portfoliovisualizer.com/bac ... sisResults

If it's a more customized version of this that OP wants, OP should learn how to use Excel.
Google Spreadsheets I believe is able to use Google Finance stock price data so if OP can figure out how to integrate those numbers to his needs, then that should do it too.

If OP is looking for a service that does exactly this... OP probably won't find one in the market because there just isn't a demand for one.
The closest thing OP can get to something like this is a personal portfolio manager which is most likely too expensive for OP to afford currently.

Anyways, if OP lives in the US, I would strongly urge OP to give a look at M1 Finance.
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geshiro
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Re: DIY investing, what do I need to create my own index fund and passive manage?

Post by geshiro »

Doctor Rhythm wrote: Sat Oct 16, 2021 4:36 pm
geshiro wrote: Sat Oct 16, 2021 3:55 pm
Doctor Rhythm wrote: Sat Oct 16, 2021 3:29 pm That last sentence still confuses me (and I assume others). Apologies if this is due to a language barrier, but it’s unclear what you mean. Is the BlackRock ETF a specific fund (please give its ticker symbol) you’re trying to outperform? What do you mean by “same margin” — margin between what?
ah sorry I pointed above , but it's the iShares Core Aggressive Allocation ETF AOA , but I want to outperform the ETF or keeping the same margin levels with other sectors
Okay - that’s looks like a balanced fund (a fund of funds that are rebalanced regularly) that’s heavy on stocks (80%) and light on bonds/cash (20%). The underlying funds are index funds. Expenses are okay, nothing to brag about but not terrible for this kind of thing. Most portfolios of stocks will outperform this ETF because the fund also includes bonds, which reduce anticipated returns in exchange for less volatility and downside risk.

If you want to beat the ETF without taking on more risk, you can buy its underlying funds or equivalent ones. This saves some of 0.25% ER (you’ll still have the ERs of the underlying funds). Do this reliably, and you hypothetically could outperform by ~$200 per $100,000 invested per year. In reality though, it’s hard to predict the outcome because you can’t execute all the daily rebalancing trades as efficiently as they can.

Is an 80/20 portfolio even what you’re looking for?
well. my first portfolio allocation design was something like this:

- Large-cap stocks 20%
- Mid-cap stocks 20%
- small-cap stocks 20%
- Emerging markets 10%
- Fixed-income securities 15%
- Global equity markets 10%
- cash 5%
Topic Author
geshiro
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Re: DIY investing, what do I need to create my own index fund and passive manage?

Post by geshiro »

Beensabu wrote: Sat Oct 16, 2021 5:35 pm
geshiro wrote: Sat Oct 16, 2021 4:11 pm how do I outperform my own asset allocation versus BlackRock aggressive ETF or keeping the same margin?
Nobody can tell you how to do this.

Nobody knows how any particular portfolio is going to perform in the future.

We just try our best to manage all the different risks involved according to our own personal risk tolerance and the weight we individually assign (consciously or unconsciously) to those various risks.

Once again, here are two "links of links":

Asset Allocation: https://www.bogleheads.org/wiki/Categor ... allocation

Portfolio Risk Management: https://www.bogleheads.org/wiki/Categor ... management

Read it all. Then you'll understand that nobody can give you the answer you're looking for.

What you are trying to do may be possible. But we don't know how, just like you don't know how. Later, we'll be able to look back and say "this was how". But right now, we can't do it, because it hasn't happened yet. And later, we still won't know how for the future.

If you want to replicate the performance of the S&P 500, you go with a S&P 500 index fund. Then you get that performance minus fees. The fees of most S&P 500 funds are negligible.

If you want to replicate the performance of FTSE Global All Cap ex US Index, you go with a fund that tracks that index.

If you want to replicate the performance of literally any index that is out there, then you go with a fund that tracks that index.

---

You know, I think maybe I have finally figured out what you are actually asking in your OP.

Maybe you are trying to figure out how to create your own benchmark (one that is not currently in existence as an index) that you can then track your portfolio against. If that's the case, then you can use existing funds that are in the "category" of whatever you hold in your portfolio at the same weights as your actual allocations to those "categories".
exactly like as you mention :

Maybe you are trying to figure out how to create your own benchmark (one that is not currently in existence as an index) that you can then track your portfolio against. If that's the case, then you can use existing funds that are in the "category" of whatever you hold in your portfolio at the same weights as your actual allocations to those "categories".


that's right more than replicate the S&P 500 . I was looking to benchmark my own portfolio against the most common indices like S^P 500 , russell plus manage my own portfolio with industries, and companies I like , but align to 80% stocks, 15% fixed income , 5% cash
MarkRoulo
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Re: DIY investing, what do I need to create my own index fund and passive manage?

Post by MarkRoulo »

geshiro wrote: Sat Oct 16, 2021 12:59 pm I have been lately investing in `iShares Core Aggressive Allocation ETF` from the following link https://www.ishares.com/us/products/239 ... cation-etf , but I was thinking if I can cut down the fees and reinvest every penny I would have more money to invest from earnings , however I want to create my own DIY project to replicate the performance of the S&P 500 Index or others with more freedom. Well the first difference is I can not control how much US and foreign stock I have in my own portfolio. For example, if I want 70% total international and only 30% US large cap and which companies to invest based on my likes and industries.


what do I need to create and manage my own index fund beside research ( technical analysis , fundamentals analysis , balance sheets, etc) , and only once a year rebalancing?
You are confusing things by calling the set of stocks you intend to buy an "index fund."

What you are describing is neither a "fund" nor an "index." You just want complete control over the stocks you own and the amounts of each.

Open a brokerage account with any reputable company that allows you to purchase fractional shares. Schwab and Fidelity both allow this, though you'll want to look into the details at each brokerage. Robin Hood does, too, and might be a better fit for what you want to do.

That is it. Then you just do as much or as little research as desired and buy and sell as much as you want.

You probably wont get much advice here about WHICH stocks to buy and sell as this isn't that sort of forum.

Good luck.
Volkl_One
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Re: DIY investing, what do I need to create my own index fund and passive manage?

Post by Volkl_One »

This is not a recommendation to the OP.

You could fairly easily recreate an index fund on Alpaca, Robinhood, or any other brokerage which allows fractional shares and zero trading fees. In fact Alpaca has the python code in their docs explaining how to do it.
Topic Author
geshiro
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Re: DIY investing, what do I need to create my own index fund and passive manage?

Post by geshiro »

MarkRoulo wrote: Sat Oct 16, 2021 10:35 pm
geshiro wrote: Sat Oct 16, 2021 12:59 pm I have been lately investing in `iShares Core Aggressive Allocation ETF` from the following link https://www.ishares.com/us/products/239 ... cation-etf , but I was thinking if I can cut down the fees and reinvest every penny I would have more money to invest from earnings , however I want to create my own DIY project to replicate the performance of the S&P 500 Index or others with more freedom. Well the first difference is I can not control how much US and foreign stock I have in my own portfolio. For example, if I want 70% total international and only 30% US large cap and which companies to invest based on my likes and industries.


what do I need to create and manage my own index fund beside research ( technical analysis , fundamentals analysis , balance sheets, etc) , and only once a year rebalancing?
You are confusing things by calling the set of stocks you intend to buy an "index fund."

What you are describing is neither a "fund" nor an "index." You just want complete control over the stocks you own and the amounts of each.

Open a brokerage account with any reputable company that allows you to purchase fractional shares. Schwab and Fidelity both allow this, though you'll want to look into the details at each brokerage. Robin Hood does, too, and might be a better fit for what you want to do.

That is it. Then you just do as much or as little research as desired and buy and sell as much as you want.

You probably wont get much advice here about WHICH stocks to buy and sell as this isn't that sort of forum.

Good luck.
when I said fund I mean I want a complete control over the stocks I own and the amounts of each this can be using the sector ETF as you mention above since ETF is one share instead of fractional shares ( mutual index ). I am using firstrade due low to zero fee commission per transaction, on the other hand I dont like people tell me a recipe about which stock or etf or index to buy , but if I fail then that's not the right way, however I prefer doing ETF based strategy currently by sector , country , and industry to avoid time consuming on stock picking.


example: 80% stocks , 30% stocks in Technology , and healthcare ( ETF) , and going on
Northern Flicker
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Re: DIY investing, what do I need to create my own index fund and passive manage?

Post by Northern Flicker »

calwatch wrote: Sat Oct 16, 2021 3:33 pm
geshiro wrote: Sat Oct 16, 2021 3:10 pm I just want to do the following since I think it's getting some sort of confusion. I want to pick my favorite industries, companies, and countries through ETF mostly than picking single stocks , but I also will need to create some kind of portfolio tracker in google excel if M1 doesn't have it. how do I outperform my own asset allocation versus BlackRock aggressive ETF or keeping the same margin?
There are tools where you could connect shares to prices on Google using a simple function, see https://support.google.com/docs/answer/3093281?hl=en
Say you wanted to equal weight the sectors in the S&P 500. To determine how many shares to buy in each ETF you could simply divide the amount you want to invest by the result of the GOOGLEFINANCE function. (Or, use a broker that allows you to purchase shares by the dollar.)
Of course, to rebalance you would have to manually determine the number of shares to buy or sell.

Any tinkering with the existing allocations of a broad market ETF can lead to underperformance as well as outperformance. I think that's what we're saying, if it wasn't clear.
How would stock splits, mergers, acquisitions, and divestitures be implemented?
AlohaJoe
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Re: DIY investing, what do I need to create my own index fund and passive manage?

Post by AlohaJoe »

geshiro wrote: Sat Oct 16, 2021 12:59 pm what do I need to create and manage my own index fund beside research ( technical analysis , fundamentals analysis , balance sheets, etc) , and only once a year rebalancing?
What you're asking about is called "direct indexing". If you Google that, you'll find information on how to do what you're asking about.
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geshiro
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how can I improve my portfolio strategy for self passive management ??

Post by geshiro »

[Thread merged into here --admin LadyGeek]

I have been studying for a few months finance and economics in order to properly understand this world before investing , and manage my own portfolio either active or passive; however, I will start with a smaller portfolio that worth $10,000. my strategy is to take the advantages of using Lower transaction costs from platforms like firstrade(U.S , but being a Mexican I can invest here) , and gbm+ (mexico) plus I will be rebalancing once at year with the intends to match or mirror returns of a specific index with custom SECTOR /INDUSTRY GROUP / INDUSTRY ( e.g HEALTH CARE > HEALTH CARE EQUIPMENT & SERVICES > HEALTH CARE TECHNOLOGY). I know some ETF could reward me with dividends , but I will take them for reinvest strategy


- Large-cap stocks 20%
- Mid-cap stocks 20%
- small-cap stocks 20%
- Emerging markets 10%
- Fixed-income securities 15% # maybe 10% into fixed income and 5% to support friend or myself ideas projects
- Global equity markets 10%
- cash 5%

notes:
1) I have already an emergency fund over 6 months
2) I can contribute around 1.1k monthly
3) I will found more extra incomes in order to raise 3k monthly
4) I will rely on ETF , mutual fund, index as a short strategy , but I will try to avoid them and use individual stocks when I feel comfortable to take the advantage of dividends
how much would I need to avoid ETFs and pick individual stocks , cut down fees management and skills in order to do this in the short - long term?
what is the cost-benefit-effective of doing this for long term?
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Re: DIY investing, what do I need to create my own index fund and passive manage? [Mexico]

Post by LadyGeek »

geshiro wrote: Sun Oct 17, 2021 2:02 pm ...firstrade (U.S , but being a Mexican I can invest here) , and gbm+ (mexico)...
geshiro - In order to provide appropriate advice, it's best to keep all the information in one spot. I merged your update back into the original thread. If you have any questions, ask them here.

It is also important to state your home country. Your question was in the US investing forum and we assume that your questions relate to investing as a US citizen in the US. I have moved your thread to the Non-US Investing forum and retitled the thread to add your home country (Mexico).

Are you a Mexico citizen? Do you live in the US? It is important to know this information, as the answers depend on the taxation regulations for the US and Mexico.

(Thanks to the member who reported the post and provided a link to this thread.)
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
Topic Author
geshiro
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Re: DIY investing, what do I need to create my own index fund and passive manage? [Mexico]

Post by geshiro »

LadyGeek wrote: Sun Oct 17, 2021 3:55 pm
geshiro wrote: Sun Oct 17, 2021 2:02 pm ...firstrade (U.S , but being a Mexican I can invest here) , and gbm+ (mexico)...
geshiro - In order to provide appropriate advice, it's best to keep all the information in one spot. I merged your update back into the original thread. If you have any questions, ask them here.

It is also important to state your home country. Your question was in the US investing forum and we assume that your questions relate to investing as a US citizen in the US. I have moved your thread to the Non-US Investing forum and retitled the thread to add your home country (Mexico).

Are you a Mexico citizen? Do you live in the US? It is important to know this information, as the answers depend on the taxation regulations for the US and Mexico.

(Thanks to the member who reported the post and provided a link to this thread.)
ah that's a special case . I can trade in U.S freely so it doesn't matter , but taxation as not being U.S citizen I can cut down 100% only from U.S as the taxation laws says `Non-resident aliens are subject to no U.S. capital gains tax, but capital gains taxes will likely be paid in your country of origin` which I only need to pay 10% of capital gains

Are you a Mexico citizen? Do you live in the US? It is important to know this information, as the answers depend on the taxation regulations for the US and Mexico.
I am a Mexican citizen , and I don't live in the U.S plus t-mec and tlcan help a lot in this case
Northern Flicker
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Re: DIY investing, what do I need to create my own index fund and passive manage? [Mexico]

Post by Northern Flicker »

The problem is that you are trying to implement a strategic allocation by doing it in the weeds of individual stocks. It is far superior to estsblish an asset allocation at the asset class level, deciding what asset classes you want to hold, then look for efficient implementations of the asset classes.
Topic Author
geshiro
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Re: DIY investing, what do I need to create my own index fund and passive manage? [Mexico]

Post by geshiro »

Northern Flicker wrote: Sun Oct 17, 2021 10:27 pm The problem is that you are trying to implement a strategic allocation by doing it in the weeds of individual stocks. It is far superior to estsblish an asset allocation at the asset class level, deciding what asset classes you want to hold, then look for efficient implementations of the asset classes.
what do you mean by "trying to implement a strategic allocation by doing it in the weeds of individual stock"? do you have an example of "asset allocation at the asset class level , and deciding what asset classes you want to hold" ?
Northern Flicker
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Re: DIY investing, what do I need to create my own index fund and passive manage? [Mexico]

Post by Northern Flicker »

The most basic asset allocation would just use two asset class: stocks and bonds. Some divide stock classes at a finer granularity, such as US and non-US stocks (possibly further dicided into developed markets and emerging markets), large-cap, mid-cap, small-cap stocks, value and growth stocks, dividend-oriented stocks etc. Bond asset classes might be divided up as US or non-US, currency-hedged or unhedged, treasury/socereign bonds, corporate bonds, mortgage bonds etc.

It has been observed that generally your return is driven by your asset allocation, and not very much by the securities you hold within an asset class. It thus makes sense to focus on strategic asset allocation and then inolementing each asset class in your allocation cheaply, with index funds often being a good choice for implementing a given asset class.

This is a top-down method of constructing a portfolio. Focusing on individual securities to buy is a bottom-up approach that usualky leads yo a messy, difficult to manage portfolio that dors not implement a coherent asset allocation and that often takes uncompensated risk. The risks uniquely associated with a single company are called security-specific risk. Thie market does not compensate you for taking this risk. It can be diversified away by holding broadly diversified portfolios for each asset class in your asset allocation. Low cost index funds are a great way to accomplish that.

Individual investors are well served by not owning individual stocks. Security-specific risk does not materialize often, but over time it will be a drag on return if it is not diversified away.
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geshiro
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Re: DIY investing, what do I need to create my own index fund and passive manage? [Mexico]

Post by geshiro »

Northern Flicker wrote: Mon Oct 18, 2021 1:25 pm The most basic asset allocation would just use two asset class: stocks and bonds. Some divide stock classes at a finer granularity, such as US and non-US stocks (possibly further dicided into developed markets and emerging markets), large-cap, mid-cap, small-cap stocks, value and growth stocks, dividend-oriented stocks etc. Bond asset classes might be divided up as US or non-US, currency-hedged or unhedged, treasury/socereign bonds, corporate bonds, mortgage bonds etc.

It has been observed that generally your return is driven by your asset allocation, and not very much by the securities you hold within an asset class. It thus makes sense to focus on strategic asset allocation and then inolementing each asset class in your allocation cheaply, with index funds often being a good choice for implementing a given asset class.

This is a top-down method of constructing a portfolio. Focusing on individual securities to buy is a bottom-up approach that usualky leads yo a messy, difficult to manage portfolio that dors not implement a coherent asset allocation and that often takes uncompensated risk. The risks uniquely associated with a single company are called security-specific risk. Thie market does not compensate you for taking this risk. It can be diversified away by holding broadly diversified portfolios for each asset class in your asset allocation. Low cost index funds are a great way to accomplish that.

Individual investors are well served by not owning individual stocks. Security-specific risk does not materialize often, but over time it will be a drag on return if it is not diversified away.
ah it's was similar to my first design of my own portfolio where I had 5-6 asset allocation with 4 ETFs covering world index to avoid active managing as you can see . however I am not sure how 75 stocks / 10 bonds , and 12% cash where it will be mostly used for startup projects can perform in my own strategy in the medium - long or maybe short without selling positions. I created my own investing portfolio in the way to have global coverage to avoid and don't depend on a specific country , and it can be categorized as aggressive portfolio , and I will only sell the position in 10 years , and move into a more 60:40% strategy in the 30-40 years . I am 25 , and I can manage the losses and post recovery in case of a failure
- Large-cap stocks 50%
- Mid-cap stocks 12% *
- small-cap stocks 12% *
- Emerging markets 13%
- Fixed-income securities 10%
- cash 12%

IWDA iShares Core MSCI World UCITS ETF OCF 0.20% weight 50%
EIMI iShares Core MSCI EM IMI UCITS ETF OCF 0,18% weight 13%
WSML iShares MSCI World Small Cap UCITS ETF OCF 0.35% weight 15%
AGGG iShares Core Global Aggregate Bond UCITS ETF OCF 0.10% weight 20%



notes:
* means only 12% in total together
liquid cash it will be used for daily expenses plus startup projects ( business development , and other day to day expense)
wineandplaya
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Re: DIY investing, what do I need to create my own index fund and passive manage? [Mexico]

Post by wineandplaya »

Search for "direct indexing" - that's more or less what you are asking for. IBKR has a basket trading feature that should be useful.
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