Newton Portfolio Update: 19 October 2011

Extracted from the TLH Spreadsheet is the Newton Dashboard shown below.  In the white background are the Strategic Asset Allocation percentages for the different asset classes.  Numerous asset classes are still out of balance as I attempt to bring the portfolio back within the 20% threshold limits.  I'm not in a hurry to do so as ETF prices are frequently below their 195-Day EMAs.  Stronger market confirmation is needed.

Click on the screen shot to expand the image.

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Analysis of Suggested Portfolio

At the suggestion of an ITA reader, below is the QPP analysis of a potential portfolio.  This sample portfolio is made up of investment vehicles I find both familiar and unfamiliar.  ALT and RALS do not have three-year records so that will throw off the analysis.  Investments with insufficient records generally result in higher than expected projected returns and lower than actual projected standard deviations.

Based on the projected annual returns for these funds and ETFs, one sees that this is a very conservative portfolio as the return is only expected to be 4.7%.  The SD is a very low 7.45%. Scrolling down the screen shot we note a high Diversification Metric (DM) of 45%.  At least the DM exceeds our goal of 40%.  Again, remember there are two holdings with "short records" and we will read in a moment how this impacts diversification.  The Portfolio Autocorrelation is a negative 7%.  This is great. The lower the value the better.

What I might do is try to find replacements for ALT and RALVS, or simiply remove them from the list and run another analysis.

Below is the correlation matrix. Note the low correlations for ALT and RALS as this is one place "short records" interfere with useful analysis.  Look over the other investments that bring low correlation to the table.  They also carry very low projected returns.

If you have any questions, please write them in the Comments section.

Suggestion:  Click on the title of this blog post to see a full screen without the sidebar information.