Gyroscopic Investing

Hi guys,

Totally new to PP. Want to create my PP using ETF's. Which ETF's do you use for your PP and why?

Seems like the choice is pretty easy: SPY/GLD/TLT/SHY, no? These are the most liquid ETF's in each class. Why even bother with the other ones?

Some people might go with commission-free ETF's if their broker offers it. I think this might be OK if you are investing a very small amount. Otherwise, though the ETF is commission-free, you are probably paying a lot more in slippage.

According to
http://gyroscopicinvesting.com/forum/pe ... d-options/ , SPY, GLD, and TLT are not OK? Why? They are all listed in the FAQ at crawlingroad.

The issues with SPY/GLD/TLT/SHY is convertibility to the underlying assets and lack of geographic diversification. I see people here who support physical gold as opposed to an ETF talk about this. Well, that's an issue for any ETF, not just GLD, right? IIUC, with many ETF's, including SPY and GLD, "qualified" investors can convert to the underlying, but not the retail investors, which is us. Are there any funds with a stronger tie to the underlying than SPY/GLD/TLT/SHY? Are there funds that are more geographically diversified? If not, again, why not just go with SPY/GLD/TLT/SHY? Why bother with the other funds?

SHY or SHV? SHV seems to be more what HB is talking about, but it does not return anything at all. crawlingroad recommends SHY in combination with a  Treasury Money Market fund (SHV?). Why not a high yield money market account? You can get 1.00% APY. http://www.bankrate.com/funnel/savings/ ... sults.aspx Or even 2.52% APY. http://www.gobankingrates.com/

Welcome!

I personally use VTI/TLT/IAU/SCHO, but have no issues with your choices.

I like VTI as a total market fund vs a typical S&P500 fund, and Vanguard has been in that business forever.

TLT is best-in-class from a PP perspective (other than buying bonds directly, of course) and I do like it for convenience.

IAU has a lower expense ratio than GLD.  I plan to buy a few gold coins as well.

And SCHO not only has a lower expense ratio than SHY, but it also is run by someone other than Blackrock (which runs TLT, IAU, and SHY/SHV).  I personally like not having more than half my money managed by any one company just-in-case.

I don't like money market accounts because the extra yield comes with extra risk (more than you realize when the financial industry is shaky).  I don't like taking risk with my cash, so I stick with treasuries.

Welcome!

No major heartburn here with any of the ETF's listed above. Although I prefer physical for gold, for an ETF I would opt for IAU purely because it's cheaper. Beyond that any low cost ETF's work. There is an excellent list of available choices here...

https://docs.google.com/spreadsheet/ccc ... n_US#gid=8

My own choices are VGLT, VGSH and VTI mainly because I trust Vanguard and as a shareholder if they are lending out the underlying securities I get the benefit of that instead of the Wall Street wolves. I also have a small VP consisting of VT as a long term buy and hold.

I don't like ETFs because their prospectuses are too long and worded with lots of disclaimers, at least if GLD is any indication.
I'd use GTU instead of an ETF, as its structure seems simpler and less prone to abuse.
It does have a widely varying premium/discount, although that can be a source of profit if you buy when it is at discount and sell when it is at premium, which is more likely if you are rebalancing relatively frequently.