Updating the Curie Portfolio is upon us again. Even though the Curie is not one of the five ITARR experimental portfolios, I am using a modified Tactical Asset Allocation version of the risk reduction model and that is why developed international markets and emerging markets are both under target. The Dashboard, extracted from the TLH Spreadsheet, clearly shows where we are with respect to the Strategic Asset Allocation plan.
Following up on Bob Warasila's article, published early this morning, a review of the ITA Risk Reduction model is in order. In addition to reviewing the ITARR, I will add a few additional wrinkles that should improve portfolio returns.
The basic ITARR model has two rules.
- Buy Rule: Buy the index ETF when the price of the ETF moves from below to above the 195-Day EMA of the ETF.
- Sell Rule: Sell the index ETF when the price of the ETF moves from above to below the 195-Day EMA of the ETF.
Review the portfolio once a month. My schedule is now to update each ITA portfolio once every 32 days for reasons I articulated in an earlier blog. The ITARR rules are similar to the risk reduction rules explained in Faber and Richardson's book, The Ivy Portfolio. These two rules are nearly identical to those I was using when the October 1987 (Black Monday) shock hit the market.
Anytime one is using a mechanical method as described above, it is difficult to watch the ETF snap back after a rather long decline. Losing out on those early gains is painful to watch. Is there a way to counter this problem? Follow along.
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