My objective of investing in index based ETF is to have a total return that is somewhat similar to the market performance as a whole. It also acts as my benchmark for other long term portfolios. As mentioned in earlier post, if I cannot beat the market by stock selection, I should just close my long term portfolio and invest everything in these index ETFs.
My initial thought process was I would be investing upto 30% of my long term portfolio into index funds. However, after spending some time reading and understanding the various available funds, I have come to realize that there is not much choice available to individual investors. This is not to say, I do not like ETFs. I am still a fan of ETF assuming that they are structured properly and have reasonable expenses. In general, most of the ETFs have low liquidity and high expenses. I do not want my investments to get stuck in the low liquidity funds.
As of now, I will continue to remain under allocated to index ETFs. I do not know what be would the targeted allocation. I will let readers know when I make a decision.
I take a considerable amount of time to perform a thorough quantitative and qualitative evaluation for any stock or the company. I believe it is necessary since I am investing for long haul. How does a one month or two month matter when I am attempting to visualize for next 10 years or more. Yes, I agree delaying couple of months will make me miss the window of opportunity or as the stock investing lingo says, missing the multi-bagger.
Two readers of this blog left couple of intelligent questions in comment section on some of the articles. Both of these questions relate to what I term as rebalancing the portfolio (or profit booking). I wanted to wait until I posted articles on TIPBlog portfolio update and risk analysis. I wanted to discuss these two questions in the context of TIPBlog portfolio. It will help better understand the re-balancing and profit booking processes.
One of the most neglected aspect do-it-yourself investors is performing a realistic assessment of their portfolios. I have adopted a very disciplined approach to make sure I follow my quarterly regime of reviewing the progress. First step was to check out the status. Second step is to understand risk, and third step is to make changes (or execute or re-balance if necessary).
The 3Q2009 can be summarized as quarter of recovery. In my post 
There are many different styles, approach, and methods of investing. Many individual investors focus on trading (swing, positional, momentum, speculation, technicals etc.), while many others focus of investing (value, growth, blend, etc), and still many others on special situations (opportunistic, arbitrages, etc). In addition, there are quite a few individual investors that attempt at combination of trading and investing. Similar to glass being half full or half empty, I believe every style has its own pros and cons’ depending upon in what context one is looking at it. Individuals have to figure out what works best for them.
Measuring Progress – XIRR as Personal Rate of Return
In this context, I use few different monitoring and/or performance metric. Earlier, I have talked about yield on cost as one metric to determine cash flow (or dividends) received from my original investments. YOC is a very good metric to measure the growth of your dividend based cash flow over a period of time. However, it has a drawback. It does not take into account the variability of capital invested. The price of the stock does not remain static. It keeps changing over a period of time.
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