Rule #7 of Investing

Fire your investment advisor and/or broker. Make this move unless you have an extremely complicated financial situation or you cannot bear to deal with the details of portfolio management. In the latter case, you are not likely reading this blog as this is a do-it-yourself site. In the former situation – is your portfolio that much more complicated than a large pension fund? If not, then you do not need an advisor.

Consider the following arguments.

  • Why is an investment advisor unnecessary for the majority of investors? Keep in mind that we are not advocating active portfolio management so this immediately removes a lot of attention one needs to devote to the portfolio. The ITA Wealth Management approach is passive or semi-passive with an emphasis on using index ETFs to populate the portfolio. This approach does not require an advisor.
  • After the initial asset allocation plan is formed and we decide on the percentages to allocate to each asset class, it is only a matter of monitoring the portfolio each month when the broker statement arrives. Update any dividends or interest payments, check to see if the portfolio is still in balance, and wait one month for the next statement. I recommend a complete portfolio review once a year to make sure the asset plan fits your current financial situation. For most investors, the financial plan will not change more than once every five years, if that often. Five years before retiring and certainly once one retires, a critical look at the asset allocation plan is prudent. 
  • I highly recommend passive investors learn how to use the TLH spreadsheet, including the Holdings, and Dashboard worksheets, so the asset allocation plan can be monitored.  This does require a little effort, but help is available on this site.  Your financial advisor will not provide the information available through using the TLH spreadsheet.  I guarantee that to be true.
  • During the earning years the asset allocation plan will not change all that much. As new money is fed into the portfolio, it is quite easy to keep the different asset classes in balance. Just keep feeding the asset classes that are under target.  The TLH spreadsheet identifies which asset classes are out of balance.
  • The reason one does not need a full-service broker is that we use a discount broker where all investments are bought and sold electronically. There is no need to use a full-service broker if one is a passive investor. Save on commissions and save on advisor fees. Put that extra money to work in a portfolio built around index investments as shown to Platinum members.

Platinum membership is available for $5.00/mo.  Enhance your returns and learn how to maintain and monitor your portfolio.


Photograph: England

What ETFs To Use For Different Asset Classes

A question came up regarding what ETFs do we use for the different asset classes.  Below is a listing of the different asset classes and the primary, but not only, ETFs we use to populate the asset classes. [Read more…]

ITA Wealth Management Portfolio Without SDS Allocation

Variations of the ITA Portfolio

Yesterday, a question was asked here at ITA – how is the low standard deviation impacted by holding 10% in the ultra-short ETF, SDS?  To answer that question, Platinum readers can take a look at the screen shot below, I set SDS to 0% and moved that 10% up to IWM, the U.S. Equities holding in smaller cap stocks.  If you toggle back to this blog entry you will see the original QPP results.

[Read more…]

Portfolio Performance: 30 September 2011

Third Quarter Portfolio Performance Results*

Finally – the bum third quarter is finished.  Done and over!  Every portfolio gave some ground to the Internal Rate of Return (IRR) calculation.  Rare is the portfolio that performed well during the recent volatile market.  In the table below, the figures are a little lower than the actual values as I have yet to enter any third quarter dividends.  That will bolster the results a smidgen.

[Read more…]

Rule #6 of Investing

Diversify is Rule #6. Diversity reduces adversity. Simply put, spread your money out over several asset classes. For small accounts, one should at the very least consider stocks (ETF equity), bonds, and an international fund. For larger accounts, broaden into REITs, commodities, and emerging markets using ETFs or index funds. For the very largest of portfolios, break the asset classes into value, growth, and various cap sizes as suggested in many posts.

Nearly every week you will see a portfolio performance data table presented here on ITA Wealth Management. Those portfolios vary widely in size and launch date. In all cases, the number of asset classes exceeds the basic three mentioned above. While diversification does not completely protect one from bear markets, such as we experienced in 2008 and the first quarter of 2009, one does stand a much better chance of besting the total stock market or a benchmark.

[Read more…]