Quality Stock Factor ETFs
MyPlanIQ adopts asset allocation principle for portfolio management. Our candidate fund selection criteria are:
- For stocks, we advocate low cost index ETFs (or mutual funds)
- For fixed income/bonds, we advocate using a tactical portfolio that selects a fund from a list of high quality total return bond funds (our total return bond fund portfolios).
See March 6, 2017: Asset Classes for Retirement Investments for more detailed discussion.
Quality Factor Indexes
For stock investing, mostly capitalization weighted indexes are used. These indexes such as S&P 500 and Dow Jones Industrial Index normally select companies that have the highest market cap(italization) and weight them accordingly. For example, S&P 500 essentially select top 500 companies with the highest market caps, though the committee still can have option to decide to exclude/include certain companies based on some strict rules. These indexes are intuitive, natural, easy to rebalance and implicitly utilize the momentum factor — the better (higher) a market cap, the more it gets weighted.
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