s&p 500 ... what would be a "no brainer" safe percentage of portfolio?

[stockmarketbeginner]

If you go back over time, look at longer-term Treasuries and the S&P 500, and use the Kelly criterion, you'll see that 60/40 is about where you end up as an optimal allocation. That's probably why so many of those funds exist.

When I get a question from someone who knows zero about trading or investing and wants to know what to do with a wad of money (money being something they are basically afraid of), I usually recommend a 60/40 fund. You won't shoot the lights out, but you won't get crucified in the downturns.

However, you'd be better off just trading the S&P 500 using a long-term MA, like the 10-month. You'll make better returns than 60/40.

60/40 is really only for the set-it-and-forget-it crowd.

If you are young and willing to ride through the bumps, or you are an experienced trader and have some reasonable rules for when to get in and out, there is nothing wrong with a very high allocation to the index.

Trading the S&P with long-term moving average... are you talking about technical analysis and switching funds when the technicals start to look negative? I was planning to use ETFs as buy/hold/rotate/rebalance.

There can be tax inefficiency if you switch funds a lot. The taxes will be income rate taxes rather than capital gains tax rates.

 

[stockmarketbeginner]

If you go back over time, look at longer-term Treasuries and the S&P 500, and use the Kelly criterion, you'll see that 60/40 is about where you end up as an optimal allocation. That's probably why so many of those funds exist.

When I get a question from someone who knows zero about trading or investing and wants to know what to do with a wad of money (money being something they are basically afraid of), I usually recommend a 60/40 fund. You won't shoot the lights out, but you won't get crucified in the downturns.

However, you'd be better off just trading the S&P 500 using a long-term MA, like the 10-month. You'll make better returns than 60/40.

60/40 is really only for the set-it-and-forget-it crowd.

If you are young and willing to ride through the bumps, or you are an experienced trader and have some reasonable rules for when to get in and out, there is nothing wrong with a very high allocation to the index.

I don't need the cash anytime soon. I can go higher than 60% equities. I'm just wondering within your equities percentage, how much is too much for the S&P. Warren Buffet says many people can simply put 90% in the S&P and 10% in fixed income/cash. But many portfolio authors talk about spreading your equities across value/ growth/ small/ large/ international. They say you get slightly better returns and slightly less volatility. So it's a win-win to not just do all S&P. Then again, when Warren speaks, people listen.

 

[drcha]

It's a question of volatility. Since the S&P is volatile, older people who may need to make some withdrawals may be better off with a mixture. And advisers know that if there is too much rock and roll, their clients will not stay the course or will find a new adviser. As you know, all the stock funds will tank when stocks go down. I do think Buffet is right. If you're young, can truly implement buy and will absolutely hold through thick and thin, you can buy a lot of stocks.

Mebane Faber, in the Ivy Portfolio and his papers on tactical asset allocation, shows that using the 10-month moving average gets you the same or slightly better results than B&H, with far less volatility, whether or not you are using the S&P alone or a mixture of funds. You can google his papers on tactical asset allocation, and since you have already educated yourself pretty well about ETFs, you can read section 3 of the book and skip the rest. You don't need to make very many switches or use very many funds with his methods: I think you could implement them with only 2 or 3 funds. And when you have a system with less volatility, you can more than make up for the tax inefficiency with just a small amount of leverage. Using a little margin is not that big a deal when you have removed a lot of the volatility from your portfolio. However, I would not suggest using leverage if you are simply holding a basket of ETFs, because you'll get hurt badly in downturns.

Just as an example, if you were using the Otar hurricane warning system with the S&P (see left side of this page: http://www.retirementoptimizer.com/), you would have made 14 switches (7 trips in and out) since 1988. That's about 1 switch every other year. And yes, there would have been some years with worse tax efficiency.

Personally, if I were young (I'm not) and I wanted to do B&H (I don't), I'd just buy IJS (small cap value, which over long time periods is likely to best everything else) and call it good for 30-40 years. I recommend that you check out the stuff Ploutos is writing on Seeking Alpha; in his many articles he suggests several useful methods to improve results with less volatility and few or no trades.

With B&H, it's best to limit the number of decisions you need to make. You have to avoid tweaking and refining your choices, which may lead to underperformance.

I hope this is helping.