100 Level

Investing Made Simple: Eight Basic Rules to Follow

As a review, here are the fundamental principles of investing. Follow The Golden Rule of Investing by saving more than you think you will need. Develop an investment plan and follow it. Build the portfolio around index funds or index ETFs.  I prefer low-cost ETFs.  Eschew individual stock selection as it is a losers game for all but a few. Diversify all over the globe.  Think outside the … [Read More...]

Solving Investment Problem #5: It is too late to start saving.

Balderdash!  It is never too late to begin saving for retirement.  Yes, it is preferred to follow "The Golden Rule of Investing" and start saving as early as possible, but it is never to late to begin.  Let me illustrate with a short story. I know of one family that had almost no savings by age 57.  The house was paid in full, but savings for retirement were close to … [Read More...]

300 Level

Sortino Ratio

Sortino Ratio: Calculation Steps Calculating the Sortino Ratio is not too difficult assuming you have historical data for the Internal Rate of Return (IRR) of the portfolio and the IRR for a benchmark. Here at ITA Wealth Management our primary benchmark is Vanguard's Total Market Index Fund, or VTSMX. Eventually we plan to move to the ITA Index, a customized benchmark for each portfolio. In … [Read More...]

Momentum Percentage – Calculation and Interpretation

As promised in a recent comment I have prepared an explanation of how the Momentum Percentage number in the Ranking Spreadsheet is calculated and how it should be be interpreted. This may seem a little complex at first read, but I've tried to illustrate and make understanding as simple as I can. There's lots of ink that may require lots of think! … [Read More...]

200 Level

Will An All Equities Portfolio Provide Superior Retirement vs. All Bond Portfolio?

We are trying to answer the assertion that the stock to bond ratio does not make a significant difference when it comes to retirement planning.  Yesterday, I posted two blog entries that dealt with the beginning arguments.  Here is the link to the first entry and the link to the second one where I focused on the all bond portfolio.  In this blog post I will show the results of an … [Read More...]

Stress Testing the Kepler Portfolio

Next week the Kepler Portfolio is up for review.  In advance of that update I am running what I call a "stress test" assuming this to be your retirement portfolio.  Given a set of assumptions laid out in the first slide, would this portfolio last through retirement? Here we have a 40 year-old who plans to retire in 2040 at age 68.  Having already saved $200,000 and planning to put away another … [Read More...]

400 Level

Risk-Parity Portfolio: What Is It And What Does A Risk Portfolio Look Like?

Reducing Risk Through Risk-Parity Risk-Parity: Have you heard of the term or seen reference to this style of portfolio construction?  Join the crowd if this is new to you, even though the Risk-Parity idea has been around for quite a few years.  Risk-Parity is an alternative approach to portfolio construction where assets are allocated based on risk rather than allocation according to … [Read More...]

Using the Ranking Spreadsheet as a Timing Tool

This Post is in response to a comment from a member concerning whether the Ranking Sheet (and Momentum Percentage) might be useful as a general market timing tool for different markets (e.g. US Equities, non US Equities). As suggested by the member, I've setup the spreadsheet with only 4 ETFs, US Equities (VTI), Developed Markets ex-US (EFA), Emerging Markets ex US (VWO) and (the inevitable) … [Read More...]