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When it comes to managing investments like a professional, even knowledgeable investors might be surprised by how far they can stray from their goals. I know that when I first began to use the DIY.Fund tools, some of the basic insights shocked me.

For example, I keep tight control on asset allocation in my retirement portfolio by regularly adjusting my 401k contributions to match my desired allocation. However, I stopped paying attention to my sector allocation because it was tough to track.

I thought that as long as I took care of the basics (a high savings rate and a reasonable asset allocation), and I didn’t bet too heavily in any one direction I would be fine. I never felt great about this decision, since I knew that the total stock market tends to weigh too heavily towards the top few performers each year, but I didn’t want to be bothered trying to rebalance my sector allocation every year when I already had so much going in my favor.

Since different sectors tend to outperform other sectors each year, it can be strategic to set sector allocations that align with my goals. Sector allocation is the division of the equities portion of my portfolio among the 11 major industrial sectors.

  • Information & Technology
  • Financial Services
  • Healthcare
  • Consumer Discretionary
  • Consumer Staples
  • Energy
  • Utilities
  • Materials
  • Telecom
  • Industrials
  • Real Estate

I am a young investor aiming to fund my retirement, and I am willing to take on risk to increase my returns.  I want to “over allocate” in volatile sectors that tend to have higher long term returns such as technology, energy, and healthcare. Likewise, I want to “under allocate” in sectors that tend to be more stable like consumer defensive and industrials.

Imagine my surprise when I learned that my actual sector allocation aligned with reasonable allocations (given my goals)  in just 4 out 11 sectors.

Major misalignment between my target sector allocation and actual allocation

Major misalignment between my target sector allocation and actual allocation

Even as a conscientious investor, when I didn’t have regular access to important information, I pretended the the targets didn’t matter. Now that I have access to these tools it makes it so much easier to focus on the things that matter, and to ignore the noise. It is far easier to manage your portfolio like a professional when you have access to professional grade tools.

I did not stick to any sector allocation because tracking my sector allocation was too difficult. Now that I have access to professional grade management tools, I’m beginning the process of properly aligning my sector allocation to my target allocation.

For me, it was not enough to understand how markets and investing goals should lead to portfolio construction, I had to see how misaligned my portfolio and my goals were before I took action. Now that I have this information, I’m adding a few sector specific ETFs to my watchlist, so that when I have the money ready to invest, I can buy into the appropriate sector positions, and become more balanced.

How will your portfolio change when you learn more about it?


DIY.FUND was developed by a team of financial industry veterans. While building portfolio and trading systems for multi-billion dollar hedge funds, we realized the same tools are not available to the individual investor…
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