100 Level

Fama & French’s Three-Factor Model

This is a revision of a blog I posted over a year ago. In 1992, Fama and French broke out their three-factor model and changed the way we construct portfolios. Again, quoting from Hebner as to how the three-factor model advanced the relationship between return and risk as it relates to a portfolio. “The Fama/French model added two other fundamental determinants. Fama and French sought to … [Read More...]

Portfolio Construction the ITA Way

David Swensen writes in his "Unconventional Success" book, "Construction of a financial-asset portfolio involves full measures of science and art.  The science encompasses the application of basic investment principles to the problem of combining core asset classes in an efficient, cost-effective manner.  The art concerns the use of common-sense judgment in the challenge of incorporating … [Read More...]

300 Level

Johnson & Johnson (JNJ): A Cornerstone Stock

With new data available I thought it prudent to analyze JNJ, a stalwart of a company.  Johnson & Johnson was one of the requested stocks by a Platinum member and it is found in many portfolios due to its consistent performance over the years.  Where does it stand today? This information is not available for publication elsewhere on the Internet. … [Read More...]

ITA Ratio Video/Audio Clip

Here is another help session for users of the TLH spreadsheet.  This clip provides additional explanation of how to introduce the ITA Ratio, a new performance bar for index portfolios. … [Read More...]

200 Level

Schrodinger Portfolio Update: 3 January 2012

With all dividends recorded, the following Schrodinger Dashboard shows this portfolio is in very good condition.  At least nearly all asset classes are within the target ranges.  I am down about 170 shares of RWX in international REITs, but we have plenty of time to rebuild that asset class as the price of RWX is well below its 195-Day Exponential Moving Average (EMA). … [Read More...]

Bohr Portfolio Review: Reworked Asset Allocation Plan

With developed international and emerging markets still priced below their 195-Day EMA, I took the opportunity to rework the asset allocation plan of the Bohr and move it a little more toward the "Swensen Six."  This required an increase in the bond-income asset class and reduce exposure to U.S. Equities.  Below is the revised Strategic Asset Allocation plan.  This move … [Read More...]

400 Level

Adding SDS to Reduce Portfolio Uncertainty

Another risk reducing card to use with the ITARR model is the ultra-short ETF, SDS.  By allocating 10% of the portfolio to SDS, we make a significant difference in breaking the back of portfolio volatility.  While the projected return is lower, take note of the dramatic increase in both the Return/Uncertainty ratio and the Diversification Metric (DM). … [Read More...]

ETF Evaluations In Preparation for Euclid Risk Reduction Analysis

At the close of the market tomorrow (1/12/2012) I will examine the relative price of each ETF used in Euclid and compare it with its 195-Day EMA.  For example, in the slide shot below the price of VTI is well above its 195-Day EMA.  The ITA Risk Reduction model calls for holding a full position in VTI.  Checking the Euclid moments ago, Large-Cap Blend (VTI) is slightly over target … [Read More...]