Been a BH for > 10 years. Thanks to the community.
I believe that index investing will provide me with better risk adjusted returns as opposed to picking individual securities. I do not have the time, knowledge, or desire to learn how to pick individual stocks.
I am entertaining using a very small percentage (~5%) of my asset allocation to take a take a concentrated bet/gamble in a concentrated sector.
It will be a one time contribution without pouring in additional monies.
If I always use index funds instead of individual securities why am I writing this question?
- This space is a very small portion of the global market
- This space is extremely volatile
- This space is dominated by the top two assets (~80%)
- There does not currently exist a 'pure' index fund according to a BH approach to market cap with a reasonable ER (currently they have a 2.5% ER whereas the one below is around 0.5%)
- invested in the top 20 assets by market capitalization
- weekly rebalancing
- A maximum component weighting of 10% for each asset
1. Do you recommend I wait until a index fund arrives with a reasonable ER (and acknowledge it may never come to fruition)?
2. Do you recommend I create such a fund myself? I don't prefer want to do this since it involves time and I would prefer to invest and forget about it.
3. Is it possible to create an index fund of such a small concentrated sector? I've always looked at broad based mutual funds before and never looked at small sectors.
4. What do you make of the maximum weighting of the 10%? I understand that the top two assets will have less money than a pure market cap approach and smaller securities will be over-weighted.