Delta Factor of International ETFs

Readers interested in equity and bond "Delta Factor" projections will find the following international "Delta Factor" data table of interest.  For this set of ETFs, the reference or standard upon which the results are tested is the international iShares, EFA.

I used three years of data to reduce the number of "short records."  Only the two Indonesia ETFs (EIDO & IDX) have fewer than three years of data.  By the way, I hold shares in both EIDO and IDX.

Based on three years of data, the following QPP analysis is not all that hot on the international market going forward.  For those readers who have the QPP software available, try a four-year analysis and the results don't look so grim.  The reason is the major bear market of 2008.  In 2012 and 2013, we will begin to work out of the price trough created during 2008 and early 2009.

Click on table to enlarge.  Post your questions in the Comments box.

Always keep in mind that these "Delta Factor" data tables are projections and at best are only probability arguments.  They are to help us tilt the portfolio in the right direction.  Any time one sees numbers, the mind is conditioned to latch on to them and pay far more importance than they merit.  I too need this reminder.

Portfolio #1: Ages 15 – 25

Portfolio #1 emphasizes simplicity.  This is a starter portfolio for young investors who have little to save, but want to begin putting together a core portfolio to build on in later years.  It is extremely simple in that it holds only four asset classes.

While the projected return is relatively high based on our S&P 500 projection of 7%, the 9.2% return comes with a high projected standard deviation.  The very young investor can handle this as there is plenty of time to recover from the bear markets that are almost sure to hit over this ten year period.  The diversification is very low as we expect from a portfolio holding only four ETFs.  This is very much a "starter" portfolio.  If a young investor is not satisfied with this diversification, they will want to take a careful look at Portfolio #2, even though it is a little more complex.

Investors using Portfolio #1 could reduce portfolio volatility by employing the ITA Risk Reduction model.