In reply to the Seeking Alpha "Holy Grail" article, one reader recommended the following asset allocation plan. In this portfolio I am using JNK as the high yield investment. There are likely better choices if someone cares to make a suggestion. In the following portfolio, SLV was eliminated and GLD was reduced from 5% down to 2%. The reader who suggested the following portfolio does not like SDS any more than I do. The reason for including it in the original HG portfolio is to bring down the projected uncertainty or risk. As this market moves higher, SDS looks more attractive. Having said that, I do not recommend including SDS in any but very large portfolios. As I recall, I only hold it in two of the seven portfolios available to Platinum members.
The portfolio suggested below is quite strong, but it does give ground to the "Holy Grail" portfolio assuming one pays attention to Quantext Portfolio Planner (QPP) analysis. As a reminder, the projected return and uncertainty values for the HG portfolio were 8.4% and 12.8% respectively. The Diversification Metric (DM) was 44%. Compare those values with the projections provided below.
If one takes a scientific view of these two possible portfolios, the projections likely overlap if one were to supply uncertainty to each value. Take the 8.1% (rounded) projected return value below. Suppose one argued that the 8.1% projection carried a +/- 5% uncertainty. If this argument is true, then the projected return could be as high as 8.4%. Using similar uncertainty projections for the HG projected return, that 8.4% could dip down to around 8%. My point is that these projections are not absolute numbers. Therefore, one needs to be careful not to think of them as absolute values, but as "best guesses" and the guesses will overlap if they are off by very small percentages.
Readers will find the Delta Index table below for this new portfolio. Use this table only as a very broad guideline and keep in mind that future projections are highly speculative at best. Where this table seems to work best is at market highs and lows. In those situations, the Delta Index tends to turn all green in deep bear markets and all red at market highs. The Delta Index column below tells a story that we are in a mixed market environment.