Simple Four ETF Portfolio Brings Home Excellent Results

Check out this simple four (4) ETF portfolio over on the revised ITA Wealth Management blog site.

Modifying Dual Momentum Investing Model

Investors interested in the “Dual Momentum” model should check out the following summaries of this method of portfolio management.  The third link explains how the DM model can be modified.

Bullish Percent Indicators and Portfolio Performance Data

Check out the Bullish Percent Indicators and Portfolio Performance data over on the “new” ITA Wealth Management site.  This new site ( has been operational for about 1.5 years so check out all the new information.

Also, do a search for Rutherford Portfolio and Dual Momentum.



Baker’s Dozen Portfolio

Check out the Baker’s Dozen portfolio using this link.  Learn how to improve portfolio return while reducing risk.

There is also information on Dual Momentum investing over on the “new” ITA Wealth Management blog.


“Swensen Six” Series Coming



Be sure to link to this coming week to read the three-part series on the “Swensen Six” portfolio.  To get you started on what the “Swensen Six” is all about, check out these three articles.


To read the three articles over on you will need a Platinum membership.  These articles are all about portfolio management.

Aristotle To Use VTI/TLT Ratio

Check this blog to see how the Aristotle Portfolio is going to be managed using ideas from Benjamin Graham.

If you have not recently checked out the upgraded ITA blog, check the URL under my name.


Basic Information for Momentum-Optimization Model Investors

Investors wishing to set up a basic portfolio will find all the essential information in the following three screenshots.  The slides are as follows.

  • Ranking of ETFs that will provide global coverage and include low correlated securities that can be used during bear markets.
  • Current Buy-Hold-Sell recommendations for rebalancing assume the investor is employing the ITA Risk Reduction model.
  • Recommendations for any investor interested in using the momentum model.

This material is not available for publication elsewhere on the Internet.

[Read more…]

Investing Review: Examining the Basic Principles

From time to time it is useful to go back to the basics and make sure we have an investment plan that makes sense and has a high probability of adding value, or as we like to say, adds alpha to the portfolio.  In one of his later posts, “HedgeHunter” recommends laying out an investment plan.  Here are a few basics.

  • Follow The Golden Rule of Investing by living below your means and save as much as you can as early in life as you can.  Even if you are limiting in your saving plan, stick with it and stay disciplined.
  • By all means, use index mutual funds or non-managed index ETFs.  My preference is to use ETFs.  ITA Wealth Management is loaded with examples of security tickers such as VTI, VEU, VWO, VNQ, etc.
  • Lay out an asset allocation plan.  Readers will find an example below.  Twelve (12) to eighteen (18) asset classes should be sufficient.
  • Within the asset allocation plan determine what percentage you plan to invest in each asset class.  I still think this is one of the most difficult decisions an investor makes.
  • Read a few investment books I recommend throughout this blog.  Hear what other investors have to say.  Be aware that my book recommendations have a bias toward index investing and my investing style is rather conservative.  It may not seem conservative with all this discussion on momentum, optimization, and risk reduction – but it is.

Einstein Dashboard:  The following screenshot was extracted from the Einstein TLH Spreadsheet and is an example of the Einstein asset allocation plan.  It is more colorful than one might expect as I am deviating from the asset allocation plan by employing the Momentum-Optimization Model overlay with this portfolio.  In addition, I am paying attention to the ITA Risk Reduction (ITARR) model as I am adamant about preserving capital.

U.S. Bonds, Int’l Bonds, Precious Metals, Commodities, and Emerging Markets are all under target as these are currently under-performing asset classes.  Expect this to change over the coming months and even in the next review of the Einstein.


Another example of an asset allocation plan is one I use with the Schrodinger.

Schrodinger Dashboard:  In this portfolio most of the asset classes are in balance.  Due to the recent strong performance in Small-Cap Growth (VBK) this asset class is now above target and will need to be scaled back.  Commodities is under target and could use a boost.  If one is sticking with an asset allocation plan, momentum is out the window.  After laying out an asset allocation plan, and the Schrodinger may not fit your risk capacity, stick with it and keep the various asset classes in balance.


Based on the recent research from “HedgeHunter” I think it is prudent to employ the ITARR overlay.  What I am less sure about is the 195-Day EMA.  I need to do more research on EMAs as I recall reading an academic paper where a little faster moving EMA is preferred.  My recollection is that a 150-Day Exponential Moving Average is superior to the 195-Day EMA.  The problem with choosing one over the other is that the decision is based on back testing and there is no guarantee that is what will work best in the future.

If you are looking for an approach that requires about one hour of work per year, set your portfolio up similar to the Schrodinger.  It you want to be a little more active, then consider the MOM with the ITARR overlay.  Examples of these approaches are on display each month as the various portfolios come up for review.  To gain access to all the details requires a Platinum membership so keep that option in mind.

Which ETFs To Use When Constructing A New Portfolio

Which ETFs do I recommend for different asset classes when putting together that first portfolio?  The first move is to decide which asset classes to use.  Twenty-five months ago I posted this Asset Allocation blog and little has changed over that time.  One error in the table is the position of VEA.  That ETF should be included in the Developed International Equities box rather than the Emerging Market asset class.  Since posting this asset allocation table I added a Precious Metals asset class to several portfolios.  Another change is that I no longer use mid- and small-cap blend (VO and VB) as those asset classes are covered by the value and growth ETFs.  This cuts the number of U.S. Equity asset classes from nine to seven.  A strong argument can be made that the “Big Nine” (now “Big Seven”) are highly correlated and one only needs VTI to cover all U.S. Equity asset classes.  If you want to simplify your portfolio or if it is rather small, use only VTI for U.S. Equities.  However, I’ll continue to use VTI, VTV, VOE, VBR, VUG, VOT, and VBK as the primary representative ETFs for the U.S. Equities market.

This material is not available for publication elsewhere on the Internet.

The remaining nine asset classes are: Cash, Domestic Bonds (BND), Developed International Markets (VEU), Emerging Markets (VWO), U.S REITs (VNQ), International REITs (RWX), International Bonds (BWX), Commodities (DBC), and Precious Metals (GTU).  While these are the primary ETFs used to calculate the ITA Index benchmark, I hold other ETFs in different portfolios as well as a few individual stocks.  For example, I don’t limit bonds to just BND.  Other bond and income ETFs include BSV, BIV, AGG, JNK, LQD, TLT, TIP, SHY, etc.

As stated many times on this blog, the second decision of what percentage to allocate to each asset class is the most difficult decision facing investors.  If one follows the Momentum-Optimization Model, and you are satisfied with the constraints applied to the different asset classes and individual securities, it is possible to receive help with this difficult decision through the optimizer.

Here is the link to a series of articles on Dynamic Asset Allocation or Adaptive Asset Allocation.  I believe I referenced this second article in a prior blog.

Here is the latest ranking of ETFs I use to populate most of the portfolios tracked here at ITA.


Where To Begin If You Have Never Managed A Portfolio

If someone asked you what to do with an inheritance or 401(k) sum of money, what advice would you give them?  Here are some basic ideas for a novice investor.

  • Assume the money is in your checking account and available to be invested.
  • Open up a broker account with a discount broker.  For example, go to a “bricks and mortar” location if possible and fill out the forms.  A good idea is to print out the forms in advance and fill them out at home.  Then take the forms into the broker (TDAmeritrade for example) and have them look over the forms to make sure everything is accurate.
  • If you are a couple, set up separate accounts for each person.  I think it is wise to keep investment portfolios separate.
  • Invest the minimum amount in each account.  If there is no minimum, begin with a minimum of at least $1,000 in each account.  Another option is to place all the available money in a money market account so it is available for investing.  If the money is coming from an inheritance, invest the money in a taxable account.  If the money is coming from a tax deferred account, and you can set up a self-directed IRA account, do that.
  • With the market as high as it now is, I certainly would not invest everything in the stock market.  Be patient.  Take any where from six months to two years to fully invest the money.  The time will depend on the amount of money to invest.  There is nothing quite so discouraging as to loose money right out of the starting blocks.
  • By all means, use index funds or index ETFs rather than trying to select individual stocks.
  • At this point I would select one of the ITA portfolios to follow on this blog.
  • Begin an investing education program by reading some of the Top Ten Investment Books.

Coming back to the original question, what advice would you pass on to the novice investor?