100 Level

Are Optimizers Anything But Error Maximizers?

Mean-Variance Optimization "Mean-variance optimization presents an illusion of precision that is seductive but generally fallacious and even dangerous."  So writes Richard O. Michaud in his book, Efficient Asset Management: A Practical Guide to Stock Portfolio Optimization and Asset Allocation.  Harold R. Evensky provides this MVO warning.  "In spite of my strong defense of Markowitz's … [Read More...]

A Very Basic Three ETF Portfolios

In response to the keep it simple blog post, here is a three ETF portfolio analysis.  The 30% allocation to bonds (BND) pulls down the projected return to 6.2%.  Allocating that percentage to bonds also holds down the projected volatility to 12.8%.  Note that this simple portfolio outperformed the S&P 500 over the past five years, and did it with a lower standard deviation. With only three … [Read More...]

300 Level

Einstein Portfolio Review: 6 February 2012

Review time is here again for the Einstein Portfolio.  Examining the Dashboard or Asset Allocation plan, shown below, is the first task when updating or reviewing a portfolio.  Actually, I check the broker account to make sure all transactions are current.  While it took a little time and patience, the portfolio is now in balance with exception of Small-Cap Growth, and that asset … [Read More...]

Creating The Customized ITA Index Benchmark For The Kenilworth And Other Portfolios

Constructing a customized benchmark to use as a performance standard is nearly as important as putting together a Strategic Asset Allocation (SAA) plan for a portfolio.  If one does not benchmark a portfolio how is it possible to know how well the portfolio is being managed?  To understand what is required to come up with a good benchmark, check this reference.  I also recommend … [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...]

Portfolio Review

Einstein Portfolio Review With the computer alarm ringing this morning, I noted it was time to update the Einstein Portfolio.  For new members, I cycle through seven key portfolios used as examples for interested investors.  The Einstein Portfolio is one of the seven.  During each review, I first look over the asset allocation worksheet called the Dashboard.  Below is the … [Read More...]

400 Level

The Condition of Bonds Using Delta Factor

What is the current condition of bond ETFs and should they be part of the portfolio?  To examine this question one method of analysis is to apply the Delta Factor.  When I run a reversion-to-the-mean analysis on bonds, I use AGG as the reference or standard.  For equity ETFs I use the VTSMX total stock index fund.  In the following table each bond ETF is compared with the … [Read More...]

A Twist to the ITA Risk Reduction Model

Photograph: Mountains near Emerald Bay at Lake Tahoe.  Taken from the California side of the lake. While we want to keep the ITA Risk Reduction model as simple as possible, there is another wrinkle available for sophisticated investors.  Platinum readers will be interested in the explanation that follows. Platinum membership is available for $5.00 per month.  Learn how to reduce … [Read More...]