Sectors only ETF portfolio - Critical questions to me

[Hatemalaa]

Hello, I'm thinking of allocating 80% of my portfolio as sector ETFs (mainly Healthcare ETF, Technology ETF, Property ETF, and Infrastructure ETF) - I might add Utilities ETF.

Since I'm not that experienced in stock market, I would rather go for ETF.

The reason why I'm having that 80% in selected sectors, is that I want to avoid some sector (that will not be avoided if I selected any diversified ETF).

1) Do you think that this is a very risky approach - knowing that I'm planning to hold them for at least 5-7 years?
2) Is there any better way to diversify while avoiding some sectors which I'm unwilling to invest in?
3) Is there any type of investment in the stock market can allow me to open a managed account, me to select the stocks/ETF, then expert to actively buy/sell the stocks for high returns on my behalf?

Thanks

 

[So_Cynical]

Sounds like you need to increase your market confidence, do some reading and watch some videos..

 

[Sharkman]

why make things so complicated?

this is my personal opinion only, obviously it's completely up to you what you choose to do with your capital, but i would just pick a broad market ETF over the index you're interested in and stick with it. even experienced investors would struggle to predict with perfect accuracy which sectors are going to do well and which ones won't over a 5-7 year timeframe. in the few years immediately following the GFC there wouldn't have been all that many who would've predicted that the banks would struggle mightily over the last half of this decade. i'll freely admit that i didn't, and i've invested in stocks since i was a teenager in the mid-late 90s.

if growing your capital over a mid-long term timeframe with minimum fuss is your goal, then just keep things simple, go for a broad market index ETF, make regular contributions to it and over time it will grow with minimal input from you. if you want an "expert" to make all your decisions for you, that sounds like a private advisor type arrangement, in which case expect to pay massive fees (as a rough guideline i would guess this will be something like 2% of your portfolio's NPV, or $10K, whichever is higher, per year). not a road that i'd walk down.

the other benefit is that the broad market ETFs tend to have much lower MER (eg. IVV is just 0.04%). compare that to a sector specific or flavoured ETF such as OZR (SPDR resources) and you're looking at a 0.40% MER. it might seem tiny, but punch the numbers into Excel and you'll see what a big difference it makes after a couple of decades.

 

[Hatemalaa]

Thank you so much for your comprehensive response.

The only thing is that I need to avoid specific industries, that's why I can't go with the broad market ETF. And wondering if there is any alternative to it to have a balanced portfolio?

 

[chips88]

Just my 2c, if you haven't already then check out The Ivy Portfolio by Eric W. Richardson, it talks a lot about setting up a portfolio of ETFs in different markets and indexes, I think it will answer most of your questions.

 

[Hatemalaa]

Just my 2c, if you haven't already then check out The Ivy Portfolio by Eric W. Richardson, it talks a lot about setting up a portfolio of ETFs in different markets and indexes, I think it will answer most of your questions.

Thank you so much! I will do right away!

 

[aus_trader]

Thank you so much for your comprehensive response.

The only thing is that I need to avoid specific industries, that's why I can't go with the broad market ETF. And wondering if there is any alternative to it to have a balanced portfolio?

Which Sectors or Industries are you trying to avoid or leave out in your portfolio ?

 

[Hatemalaa]

Which Sectors or Industries are you trying to avoid or leave out in your portfolio ?

Financial sector, FMCG, and any shares of businesses with core/main activities/services/products around Gambling, casinos, tobacco, weapons, alcohols.

 

[Sharkman]

Financial sector, FMCG, and any shares of businesses with core/main activities/services/products around Gambling, casinos, tobacco, weapons, alcohols.

so ethical investing essentially. there are some funds specifically geared towards that if you want the convenience of a single fund that meets your sector restrictions. one that i found on a quick search was this one
https://www.investsmart.com.au/invest-with-us/landing/ethical-share-fund-managed-fund-asx-ines/169
but it comes with an eye-watering 0.97% MER.
if you're willing to pay that, or go thru the hassle of juggling multiple funds all of which have relatively high MERs (though not quite that high), then kudos to you for standing by your principles. i personally would never invest directly in tobacco etc. companies, but i don't have any qualms about investing in index ETFs that happen to contain them.

 

[aus_trader]

Financial sector, FMCG, and any shares of businesses with core/main activities/services/products around Gambling, casinos, tobacco, weapons, alcohols.

Sounds like a very conscious person when it comes to investing, as Sharkman said probably can be classified as in the realm of ethical investing.

Vanguard also offers a low cost (0.18% management fee) fund with that sort of theme "Vanguard Ethically Conscious International Shares Index ETF (VESG)". It excludes exposure to ASX so that may be more in line with your investment objective to exclude those companies that makes the largest weighting of the asx which are the 4 'oink oink' financial firms.
https://www.vanguardinvestments.com...ct.html#/fundDetail/etf/portId=8225/?overview

Although not as strict in terms of investing, I also like to lean towards your thinking.

 

[Hatemalaa]

Thank you guys. That was really helpful. Will due my diligence on both!