Value Oriented Portfolio

Last evening a value oriented portfolio was mailed to me so I thought I would run it through a Quantext Portfolio Planner analysis.  Unfortunately, three of the thirteen ETFs have "short records."  This simply means the data does not extend back a minimum of three years. The ETFs with limited data are: MGV, VXUS, and VSS.  Nevertheless, here are the results.

To view this portfolio, register and wait to be elevated to the Guest level.

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What Comes After The Strategic Asset Allocation Plan?

Where do we go next after the following plans are in place?

  • Credit cards are paid in full.
  • A savings plan is in effect and money is set aside each paycheck.
  • A discount broker account is open at a business such as TDAmeritrade.
  • The Strategic Asset Allocation plan is in place.
    • Ten to fifteen asset classes were selected for investment.

We now come to the difficult and all important decision of what percentage to allocate to the different asset classes. Investors have different requirements based on age, financial situation, debt, tolerance for risk, size of saving, etc. No one Strategic Asset Allocation plan fits all investors.  However, there are some basic principles that apply to the majority of investors and they are based on academic research. Here are a few of those principles. [Read more…]

Learn By Example

If your learning style is parallel to mine, it is much easier to learn by example vs. straight theory. While it is important to know and understand the logic behind an investment philosophy, it is even better to see the policy in action and observe how well it performs. That is what motivates me to write the ITA Wealth Management investment blog. This is an investment education blog.

1) How do you do it?

2) What are the steps in establishing a portfolio?

3) Does it meet my investment (retirement) requirements?

4) Do the results match the rhetoric?

5) How are the results monitored?

These are a few questions we attempt to answer through several different portfolios. While I monitor 21 portfolios (including the new Kenilworth), details of seven (including Kenilworth) are provided to Platinum members.

ITA Portfolio: A Well Diversified Mix of ETFs

Platinum members are encouraged to take a close look at the following list of ETFs that make up this portfolio.

The following material is not available for publication on Seeking Alpha or other Internet sites.  This material is reserved for Platinum members.

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Passive Management: A Tight Definition

Passive Management carries many meanings so I leave it to Harold Evensky to straighten us out as to what is meant by Passive Investing. In his excellent book, "Wealth Management" he provides this crisp definition. "Passive Management is the antithesis of active management. Its core philosophical tenet is that by brains, hard work, and technology, a manager cannot, over time and net of costs, beat the system; he can, however, beat most active managers. Passive management is often assumed to be the equivalent of index management.  It is not. Index Management is a special subset of passive management. A passive manager may make active trading decisions. His decisions, however, are based on information currently available to all investors not on an ability to read between the lines or predict future trends and events. Index management is passive management with the added constraint that the manager does not make active trading decisions."

What is the philosophy of ITA Wealth Management?

The portfolios managed on this site vary. Some are tilted toward index investing while most fall into the realm of passive investing as defined by Evensky. We definitely are not active managers in that we do not populate portfolios solely through the activity of picking individual stocks. The ideal is to set up a Strategic Asset Allocation plan for each portfolio and then stick with that plan for a long period.  As one ages it is assumed the asset allocation plan will adjust. The asset allocation plans do not vary all that much from one portfolio to the next. A core of index ETFs are selected to populate the different asset classes. There are times when we apply some Tactical Asset Allocation, which means we will over-weight or under-weight specific asset classes.


Photograph: The Arches National Park near Moab, Utah – USA

Seasonal Timing Strategy

As we approach the end of the month, review this blog entry I posted back on September 2nd.  Also run a search for Seasonal Timing Strategy to find more blog entries on this subject.

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Einstein Portfolio Update: 28 September 2011

Platinum members can witness that the Einstein Portfolio is coming very close to being in balance in all asset classes.  I placed limit orders to sell shares of VO and VB which will bring MCB and SCB back into balance.  With the small amount of available cash, I placed a limit order for BWX, an international treasure bond ETF.  As you can see from the Dashboard asset allocation plan below, we are not overexposed to bonds.  Only 9% (7% + 2%) is allocated to bonds.  We will derive income from RXW and VNQ.

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Iteration Solution

Platinum members using the TLH spreadsheet may find an iteration issue from time to time when the IRR calculation for an investment moves from positive to negative or negative to positive.  The Excel™ SS needs a little nudge to launch the iteration calculation.

Go to the TLH SS Help page and reference the #7 help video.  To find the TLH SS Help page, look across the navigation tabs.  It is three tabs to the right of the Home page.  Let me know if this audio/video clip solves the REF issue.


Smartest High Risk Portfolio

This is the last article in this series of QPP analysis of Solin's "supersmart" portfolios.  Of all the portfolios, this one is perhaps the weakest.  Read on to understand why.

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Rule #5 of Investing

When we get to Rule #5, we assume a savings plan is in place and we have converted a frivolous spending habit into real dollars. Credit card debt is zero or in decline. After much reading and study, we are convinced of the importance of asset allocation. If you made it this far as a reader, you are in the process of escaping the “dark side” of investing and that is, you are no longer influenced by the multi-billion dollar industry called Wall Street. While I do not deny there are stock investors who do quite well picking individual stocks to build their portfolios, and operate without a single thought given to asset allocation, research is replete with data showing the odds are against the average investor who operates without an investment plan.  We highly recommend you develop a portfolio plan and we are here to help.  Many times it only requires a few questions on your part.

Rule #5 is one of turning the concept of asset allocation into some specific decisions. In the table below you will see the asset allocation plan for three operating portfolios. Note that SCV = Small-Cap Value, MCG = Mid-Cap Growth etc. The beginning investor may use six to eight of these asset classes while someone with a larger portfolio will want to use ten to twelve asset classes. More on this when we get to a later rule of investing. These are only example asset allocation guidelines.  We use specialized software to design portfolios.  Silver and Gold members receive this help as a bonus for their subscription.

Asset Classes and Percentage Allocations

Asset Class Bohr Curie Schrodinger
Large-Cap Value 6% 6% 10%
MCV 7% 8% 10%
SCV 7% 8% 8%
Large-Cap Core 1% 3% 0%
Large-Cap Growth 5% 5% 9%
MCG 5% 5% 8%
SCG 5% 5% 5%
Bonds 15% 5% 15%
International (Dev.) 15% 15% 15%
REITs 14% 10% 10%
Emerging Mkts. 15% 15% 10%
Commodities 5% 5% 0%