i thought you might ( and agree it is rational, to my mind )@divs4ever, commencing with the new financial year on July 1st, 2024, I’ll be adopting a different strategy. The dividends and franking credits from my portfolio will be channelled towards creating a reliable income stream.
now i know it doesn't happen often but it does happen ( AMP comes to mind ) but have you a plan for a stock to be demoted from the TOP 20 and replacedView attachment 177544
Investing in the Top 20 Companies - A Strategic Approach
As previously discussed, I've recommended a simple investment strategy - “Buy the ASX20.” This investment approach may not have the adrenaline rush of high-risk, high-return opportunities, but it offers a solid alternative rooted in long-term stability. Investing in the ASX20 provides a thrilling front-row seat to observe how these top 20 market leaders perform collectively.
Simplicity Over Complexity
Instead of pursuing elusive high returns through intricate strategies, this exercise champions simplicity and a more measured approach. Starting from tomorrow, and continuing each Sunday, I’ll track and share the progression of a hypothetical $100,000, 20-position portfolio using the ASX20 strategy. This exercise will offer insights into how a straightforward, large-cap-focused investment strategy performs, without the additional complexity and volatility that more aggressive portfolios might entail. The objective here is to provide a balanced perspective on the potential advantages of a "buy the index" style of investment philosophy.
Skate.
now i know it doesn't happen often but it does happen ( AMP comes to mind ) but have you a plan for a stock to be demoted from the TOP 20 and replaced
( say roll over the proceeds from the departing into the new arrival )
cheers
Annual Rebalancing - Keeping your Portfolio Aligned
Maintain the harmony of your portfolio by conducting an annual rebalancing on the 12-month anniversary. This disciplined practice ensures that your investment stays in step with the evolving index composition.
just thinking , sometimes a LARGE cap does a face-plant maybe a long wait ( say six months ) to rebalance may drag on gains elsewhere ( or not )On Tuesdays of this week, I made these remarks about rebalancing
Rebalancing Alternative
The ASX20 (XTL) index comprises the top 20 stocks by float-adjusted market capitalisation. It is highly liquid and accounts for a significant portion (52%) of Australia's equity market. The ASX20 undergoes quarterly rebalancing in March, June, September, and December, with minimal rotation among constituents.
Skate.
just thinking , sometimes a LARGE cap does a face-plant maybe a long wait ( say six months ) to rebalance may drag on gains elsewhere ( or not )
but then again this is a paper experiment ( i believe ) maybe observation of such anomalies if they occur and may be educational if you decide to do it 'live' ( real money ) next year
cheers
this equal weight strategy should do well after a market retrace ( as some stocks will be oversold )
If I was doing something like this then I'd buy those going up and not those going down. Funds not used for any constituent stay in cash until the stock price starts to go up.
am more interested to see how your TOP 20 E/W goes against a passive Market Cap. ETF ( like ILC or VLC ) ( and against your current live experiment )@peter2, it's also been suggested - "Why not time the market" instead of a blanket start date"?
Adopting a "time in the markets" approach can serve as a viable alternative to the more challenging task of "timing the markets." Entering the markets at the optimal time can certainly be more profitable than not, as it allows investors to capitalise on market upswings and potentially avoid significant downturns.
Timing the markets
After all, waiting for the perfect time means never investing at all.
But to address your point about index funds or ETFs, the "time in the markets" approach I'm suggesting champions simplicity and gives you control over the investment decisions you want to make.
Skate.
@divs4ever, sometimes "Good Enough is Good Enough"am more interested to see how your TOP 20 E/W goes against a passive Market Cap. ETF ( like ILC or VLC ) ( and against your current live experiment )
' perfect time' is fairly rare , but ' good enough ' ( say the XJO under 7000 ) is not so rare
there is much to consider on market entry .. investor age , investor goals , risk tolerance and funds availability . 6 months in a term deposit MIGHT be a great strategy at the time
No one with certainty can pick the bottom or dip of the market, that is why I think it's important to pick quality stocks that can weather the storms in most markets. EFTs have their place but I think most of them are overpriced and you still have to deal with tax issues. Too many people are trying to be one-hit wonders and instos tend to target this area of trading.
@TimeISmoney you are absolutely correct - market timing demands a high degree of discipline and can be challenging to execute successfully.
Skate.
Market 'timing' does not require buying the bottom selling the top. It simply requires buying low and selling high(er).
i remember that time , but wasn't particularly well funded to participate , while not living pay-check to pay-check i was living about month to month ( with a small surplus )A return of 6% meant I would never run out of money and not consume the principal.
An ETF for all the reasons @peter2 has indicated is far easier and more efficient than handling 20 individual stocks, unless you are really going to vary those 20 stocks over time.
are just buying and holding the same 20 stocks, I see little point...just buy the ETF.
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