The Giant 5: A 5 Sector Strategy

Here is a Yahoo Finance/Investor's Business Daily article on an interesting portfolio idea. Mike Willis, founder of Giant 5 Funds , has supposedly 17 years of equity market experience (so that's 2 recessions and one of if not the longest bull market in history). He has a portfolio that spreads investments among 5 pieces: Bonds, energy, capital markets, raw materials, and real estate. According to him, these are "the things you need to have no matter what happens to the market."

There is no separate category for international funds. "We don't keep international as a separate category. Stocks are stocks no matter where they are," he said.

He has a mutual fund you can track, FIVEX. Here's the deal, 20% in each:

Bonds: He recommends Morgan Stanley Insured California Municipal Securities (ICS). This is a closed end fund (trades like a stock) yielding 4.2%

Energy: He recommends the iShares Global Energy ETF, IXC.

Basic Materials: He recommends the iShares Dow Jones U.S. Basic Materials ETF, IYM. I think a better choice might be a newer ETF, the iShares Global Basic Materials ETF, MXI. It's new this year and doesn't have years of data to back it up like IYM does. However, it offers global exposure (only 24% U.S. content), less exposure to chemical companies and more exposure to real basic materials companies like mining companies.

Equities: He divides this into pieces. The iShares S&P Europe 350 Index (IEV), iShares Russell 1000 Index (IWD) and then the 3rd piece is iShares Russell Midcap Growth Index (IWP) plus iShares Russel Midcap Value Index (IWS).

Real estate: The Streettracks Dow Jones Wilshire REIT (RWR) and the usual ICF plus VNQ. Morningstar likes RWR because it has the broadest exposure. I'm not aware that it has any international exposure; there are ETFs that cover international real estate, but I'm not sure anyone knows if they're worth investing in yet.

So the portfolio is:

20% ICS
20% IXC
20% IYM (though I think I'll track MXI)
6.67% IEV
6.67% IWD
3.33% IWP
3.33% IWS
20% RWR