100 Level

Index Investing Puzzles

Check out this interesting article titled, "The Weighting Game, and Other Puzzles of Indexing."  Here are the opening two paragraphs. "If we had hosted a panel discussion about active and passive investing 15 years ago, we would have titled it: "Indexing, Does It Make Sense, and If So, Why?" The burden of proof would have lain at the feet of the indexers. That's … [Read More...]

Yield Trap

Beware of Yield on Purchase Price On occasion I read about someone receiving a high yield from a stock, only the value is falsely calculated. Instead of using the current price, the investor insists on using the purchase price for the yield calculation. Some years ago, Lowell Miller published a book based on this misguided calculation. Let me explain what yield based on original or purchase price … [Read More...]

300 Level

Protecting the Corpus of the Portfolio

While I am not a strong advocate for guessing possible market directions, neither do I want to be a patsy and allow hard earned gains slip away as they did twice in the last ten years.  Protecting the corpus (a principal or capital sum as opposed to income or interest) of the portfolio is not to be neglected when it comes to managing assets.  The ITA Risk Reduction model is designed to … [Read More...]

Momentum-Optimization Analysis of Equity Oriented Portfolio

Momentum-Optimization Analysis In the prior blog post I analyzed a sample portfolio using Quantext Portfolio Planner (QPP).  In this analysis I will use the momentum-optimizer spreadsheet to come up with the efficient frontier, a ranking of the securities, and the "decision maker," a Buy-Hold-Sell recommendation table.  We first take a look at the efficient frontier graph to see where the current … [Read More...]

200 Level

Rule #8: Should I Invest In a Roth IRA or Traditional IRA?

Which type of IRA account should one use for a personal retirement account?  Is it best to use the Roth IRA or traditional IRA.  With the Roth IRA, one pays the taxes before investing and the money is available tax free in retirement.  With the traditional IRA, one deducts taxes going in and pays taxes when the money is withdrawn.  You may find this surprising, but it makes no difference which you … [Read More...]

Launching That $100,000 Portfolio

What does a $100,000 portfolio look like or how might one go about building a portfolio with this amount of money?  Before launching into the investment particulars, be sure to lay out a portfolio plan.  Think through what risks makes sense for your situation.  Will you be populating the portfolio using individual stocks or will you be using non-managed index funds or index … [Read More...]

400 Level

How Important Is Portfolio Risk or Portfolio Uncertainty?

The Importance of Managing Portfolio Uncertainty If 2008 taught us one lesson it is that portfolio risk is just as important as portfolio return. In the following analysis I want to examine some of the risk details of the Passive Portfolio (PP) or the Schrodinger Portfolio. At the end of 2007, this portfolio had a value of $234,160 and by the end of 2008, one year later, the value dropped to … [Read More...]

Tactical Asset Allocation

Trackers of the ITA Risk Reduction model will want to review the various ETFs we are using in a number of the experimental portfolios.  Examine the VEU graph below.  The current price is 5% to 6% below the 195-Day Exponential Moving Average (EMA).  In addition, the RSI is showing VEU is very close to the 30% buying opportunity.  If one waits until the price of the ETF moves … [Read More...]