Sample Portfolio Analysis

An ITA reader sent in the following portfolio for analysis.  Two funds, VXUS and VNQI, had short histories so the analysis is limited to 25 months of data.  Below is the QPP analysis and the correlation matrix for this group of holdings.  The S&P 500 is assumed to return 7.0% over the next six to twelve months.

QPP Analysis:  Anytime a portfolio is projected to return approximately 100 basis points below that projected for the S&P 500, one can consider it a conservative portfolio.  The projected volatility of 10.3% is another indicator this portfolio is built to withstand a major draw-down.

One observation is that a number of the holdings will not contribute all that much to the portfolio as the percentage (<=3%) is rather low.  Sometimes I will hold on to a small percentage to calculate the ITA Index.  There may be reasons for holding 2.2% in a number of the investments.

QPP Analysis

Correlation Matrix:  Due to a number of low correlated holdings, the Diversification Metric is quite high (55%), a positive indicator.  Low correlated assets almost always hold down both projected return and projected risk.  That is the case with this group of investments.  The IEF ETF should have a blue background as it is negatively correlated.Correlations




Bohr Portfolio Review: 25 February 2013

Since the last update 32 days ago, shares of VO, VB, and EFV were sold from the Bohr in an effort to both simplify the portfolio and reduce high correlated ETFs.  The Dashboard and Portfolio Performance data can be found in the following screenshots.

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Retirement Portfolio: What Are The Essential Asset Classes To Include?

A request came in from an ITA reader to put together a retirement portfolio that does not need to produce income since social security and a pension will cover those needs.  In other words, what should the retirement portfolio plan look like?  The first guideline is that this portfolio not include any individual stocks as that lays on an additional level of analysis.  I suspect most investors who select only individual stocks do not have a Strategic Asset Allocation plan, at least to the degree discussed throughout this blog.

The first step in building a retirement portfolio is to select the essential asset classes.  Here are the basic ETFs I include in nearly every portfolio, regardless whether it is a retirement portfolio or a portfolio for a thirty-year old.  This is particularly true if a portfolio that does not need to throw off income.

The following material is not available for publication elsewhere on the Internet.

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