100 Level

Gordon Equation: What Is It?

I'm not sure I ever heard of the Gordon Equation (GE) until I read about it in William Bernstein's second investment book, "The Four Pillars of Investing." Even on the first read, I skimmed over it. Now that investors are paying more attention to dividends, the GE merits additional attention. Simply stated, the Gordon Equation is written as follows: Market Return = Dividend … [Read More...]

Risk Defined

Portfolio Risk Risk is a messy word as it carries so many different meanings in the investing world.  In the most general sense, it means we don't know what is going to happen.  Here are several specific meanings of the term.  We will begin by defining "systematic" and "specific" risk. 1.  "Systematic" risk is risk we cannot avoid if we seek returns higher than the interest rates from a money … [Read More...]

300 Level

Passive vs. Active Investing

Why do large endowment funds use a passive investment strategy? Is it due to fund size and their portfolios are so large they mirror the market? Again, quoting from my “Active vs. Passive” paper, we have the following. “An estimated 40% to 50% of all institutional monies are in index or passive portfolios while only 3% to 4% of retail investors make use of passive strategies. … [Read More...]

Kenilworth Portfolio Review: 21 February 2012

While it is a few days early to update the Kenilworth Portfolio, based on the current ETF prices and their respective 195-Day EMAs, nothing is likely to happen over the next few weeks let alone the next three days.  Here is the link to the StockCharts graphs we use for the ITA Risk Reduction model.  The following two screen shots show the Dashboard and Portfolio Performance data for the … [Read More...]

200 Level

Supercharging The Swensen Six Portfolio By Adding Three Stocks And Two More ETFs

A reader of ITA suggested adding three dividend stocks (T, JNJ, & PG) to see how it might enhance the "Swensen Six" portfolio.  I made those additions, changed the allocation between TLT and TIP, and added international real estate (RWX) and commodities (DBC) to the portfolio.  These changes enhanced the projections for the "Swensen Six" in all the major metrics. … [Read More...]

The Art and Science of Portfolio Construction

Basic investment principles require long-term portfolios exhibit the following characteristics. 1.  Equity orientation. Equity orientation includes high-expected return ETFs such as VTI, IWN, VTV, VOE, VOT, VBR, VBK, etc. 2.  Diversification over the entire world market. International exposure is possible through ETFs such as VEU, EFA, VWO, EPP, etc. This blog post is not … [Read More...]

400 Level

Risk-Parity: Is This Portfolio For You?

A Close Look At A Risk-Parity Portfolio* The idea of risk-parity has been around for a number of years, if not by name, certainly by concept.  Risk-Parity is an alternative method of constructing portfolios.  Instead of building a portfolio around allocation of capital the portfolio is emphasis is placed on allocation of risk.  All eleven portfolios tracked here at ITA Wealth … [Read More...]

ITA Risk Reduction Followers

Early this morning I ran through the primary ETFs used to populate most portfolios and only commodities and gold are in the doghouse.  That is, DBC and GTU are currently priced below their 195-Day Exponential Moving average.  To see what this looks like, here is the link for DBC, our primary commodity holding. Portfolios managed using the ITARR model are out of gold and commodities.  I may hold … [Read More...]