Nearly ten months ago a list of dividend oriented stocks were discussed on Seeking Alpha. From the list of 42 Dividend Aristocrats, I honed in on those listed as a Buy. Fifteen stocks made that elite list. What kind of portfolio would an investor end up with when placed under the Quantext Portfolio Planner (QPP) microscope? There are a few surprises as readers will see below.
One of the benefits of looking at the Einstein Portfolio is to see what a portfolio looks like when nearly all the asset classes are in balance. Using a 20% threshold or target boundaries, all but international bonds and two blend asset classes are within the 20% limits. I'm still debating whether or not I want to continue to hold mid-cap blend (VO) and small-cap blend (VB) as both ETFs are highly correlated with VTI. To modify any volatile market, one needs to find investments that provide a low correlation with the major equity oriented ETFs.
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The Einstein continues to perform well when measured in absolute and relative terms. Below are the numbers.
Have you ever heard the phrase, "Beat The Market" and if so, what does it mean? Many months ago, Mark Hulbert wrote an article on this subject. Here is an important quote from the Hulbert article, and if you don't know who Mark Hulbert is, Google his name and learn about his contributions to the field of investing. In the mid-1980s, Hulbert tracked a mutual fund newsletter a friend and I edited for a few years.
"Even that, however, underestimates the difficulties of beating an index fund. Professor French notes that while the total cost of trying to beat the market has grown over the years, the percentage of individuals who bear this cost has declined — precisely because of the growing popularity of index funds.
From 1986 to 2006, according to his calculations, the proportion of the aggregate market cap that is invested in index funds more than doubled, to 17.9 percent. As a result, the negative-sum game played by active investors has grown ever more negative."
Here at ITA Wealth Management, we currently define the market to be the VTSMX index fund. When we have sufficient data, and that is not far away, we will use our customized benchmark, the ITA Index, to be our "market" reference.
One can only hope that index mutual funds and ETFs will not become too popular. We need individuals buying and selling individual stocks so there is an underlying framework to construct ETFs.