100 Level

Where To Begin If You Have Never Managed A Portfolio

If someone asked you what to do with an inheritance or 401(k) sum of money, what advice would you give them?  Here are some basic ideas for a novice investor. Assume the money is in your checking account and available to be invested. Open up a broker account with a discount broker.  For example, go to a "bricks and mortar" location if possible and fill out the forms.  A good idea is to print … [Read More...]

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...]

300 Level

Sample Portfolio For Fidelity Clients

The following portfolio represents a sample of commission free ETFs available through Fidelity.  The efficient frontier shows an asset allocation plan that is so close to an optimized portfolio that the diamond and red dots are no different on the graph. Efficient Frontier:  The indicator for the optimum portfolio lies behind the diamond dot.  The Return/Risk ratio is just a bit over 0.5, quite … [Read More...]

QPP Analysis of Actively Managed Mutual Fund Portfolio

Actively Managed Mutual Fund Portfolio The following QPP analysis is one where the portfolio is made up of actively managed mutual funds.  Long-time readers know my opinion about such funds, even though I used them throughout my teaching career.  It was a mistake.  Data was missing for JVLAX so I lumped the money market funds and the percentage (9.54%) held in JVLAX into … [Read More...]

200 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...]

Portfolio #1: Ages 15 – 25

Portfolio #1 emphasizes simplicity.  This is a starter portfolio for young investors who have little to save, but want to begin putting together a core portfolio to build on in later years.  It is extremely simple in that it holds only four asset classes. While the projected return is relatively high based on our S&P 500 projection of 7%, the 9.2% return comes with a high projected … [Read More...]

400 Level

Sharpe Ratio: Why I Prefer the Sortino and Retirement Ratios

The Sharpe Ratio is a measure of return-risk for a portfolio or individual investment.  Like many concepts that lend themselves to mathematics, it is easier to understand what the Sharpe Ratio means if written in the form of an equation. S = (R - T)/Sigma    (My editor does not have the correct symbol for Sigma.) Developed by Stanford Professor, William F. Sharpe, the return … [Read More...]

Gauss Portfolio Review: Efficient Frontier, Rankings, and Decisions

Thirty-three days rolled by and it is once more time to update the Gauss Portfolio.  Remember, this is one of the risk reduction model portfolios. Efficient Frontier:  Recent buy and sell adjustments moved the current portfolio (diamond dot) much closer to the optimized portfolio (red dot on EF curve).  In fact they are almost one and the same.  Platinum members can do a search of Gauss to see … [Read More...]