Lux Investing
How to diversify - move out of S&P into small caps now?
For the past few years I've had 80% of my assets in an S&P index and Growth index. This is my savings which I won't be spending for a long time. Wondering what the best strategy would be to diversify into small caps, international, and value stocks. All those have had a huge run up in the last few years (I missed it) and the S&P and Growth is where a lot of money is being invested now. Can you suggest a long-term strategy to reduce exposure in S&P and Growth and buy into the asset classes that are currently outperforming? Sell a % every few months and keep it in cash until there is another correction? Or simply dump and diversify now for the long haul? Or ride the S&P and Growth for a while longer to see if it has it's day?
Public Comments
- Do not try to diversify too much. If you hate correction too much, invest into a intelligent diversification. Which means you invest 25% of your assets to gold, stocks, bonds, and cash respectively.
- This may be the year of the S&P 500. The past years sure were not. But you are correct in your assumption that a diversified portfolio has a better probability of gains than a non-diversified one. There are many options open to you for diversifying into small caps. There are a lot of ETFs that focus on small caps. And there are several good managed funds also. I don't think I can list them all. Here are a couple to consider. IWN small cap value fund. IWM small cap Russel 2000 fund IJS S&P small cap value index IJR S&P small cap index Among managed funds check out Royce Funds. They specialize in small cap and micro cap stocks. A decent long term asset allocation strategy might be something like this: 25% S&P 500 SPY or IVV 15% foreign developed markets SWZ Swiss fund, EFA index fund 15% small cap Royce funds 15% Chinese stocks closed end funds CHN, TDF 15% Indian stocks closed end funds IIF, INF 15% Income fund SDY, PEY, PID As for growth funds, they are abomitable return wise. SPY and IVV have a good sprinkling of growth as do Chinese and Indian where the real growth is expected to be.
