Overview: the U.S. market and international index fund portfolio has been developed to provide a well diversified allocation of equities. To achieve optimal portfolio diversification, I have chosen for my model portfolio the best trending 3 to 5 out of 12 Exchange Traded Funds.  While 3 index fund ETFs are the minimum for smaller portfolios, the maximum number for larger ETFs should not exceed 5 index fund ETFs.

Allocation: a portfolio may be funded with 3-5 equally allocated positions. Also your portfolio should not exceed 40% of International Index Funds allocation. I like to buy in increments to see how the market is behaving. The objective is to hold positions as investment as opposed to swing or day trading.  All sector positions should be rebalanced once or twice a year because, indexes with exceptional performance seldom continue in the same pace.

Index Funds Rotation: every 4-6 weeks I compare the performance of each Index Fund ETF (see chart below). The least performing index funds are swapped out and replaced with a better performing index fund.

U.S. & International Stock Market Index Exchange Traded Funds
4-Week Price Performance Trend

Active Index Funds Model Portfolio

Re-balancing Portfolio: the portfolio may be re-balanced every 3-12 month. However with positions being swapped in and out, the portfolio should stay equally divided most of the time.

Brokerage-Account: I suggest, you open a separate account just for speculation. You can track easily your trading skills and monitor your portfolio's performance.

 Questions & Answers

How to buy equity positions?  I like to buy equity positions in 2 increments.

When to buy inverse ( "short") ETF? I buy the inverse ETF after it has crossed the moving average. For example, the market is in a down trend and I want to protect some or all of my long positions. Again don't use it to hit a home run - use inverse ETFs responsibly. more...

When to use leveraged ETFs? I use leveraged ETFs for swing trades only. Buying a leveraged ETF at an inopportune time can set your portfolio back real quick. Timing is a key component for investing in general, and investing in leveraged ETFs in particular. I don't buy leveraged ETFs when the market goes through a consolidation or sideways, because it's difficult to spot a sustained market direction. Leveraged ETS gain twice as fast but also lose twice as fast.

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