The Feynman Portfolio Study

Lowell has invited me to author a series of posts on the ITA Wealth Management website that may be of interest to Platinum members interested in learning more about the practical application of some of the strategies, tactics and analysis tools that Lowell uses on the site and how these might be expected to perform under a variety of market conditions.

I plan to do this by back testing the performance of a diversified portfolio of assets over a 6-year period from mid-2007 to mid-2013 (present). The period is chosen to include the (major) bear market of 2008 and the subsequent (major) bull market from March 2009 to the present time. Of course, there are also minor rallies and retracements throughout this 6-year period.

The assets included in the portfolio will be Exchange Traded Funds (ETFs) that have a sufficient historical record to cover the chosen time period. This imposes some limitations on the ETFs that can be used but the assets chosen are considered to be unbiased in terms of reflecting the overall structure of the total global market and the asset groups contained within that market. Thus, from a straightforward performance perspective, it should not matter whether the issuer of the ETF is iShares, ProShares, Vanguard or any other issuer with an offering covering the same market segment. In keeping with Lowell’s tradition of recognizing famous physicists we are naming this the “Feynman” Portfolio.

The arguments for the use of ETFs in the construction of a diversified investment portfolio, and considerations to be made in choosing which ETFs to include in a personalized portfolio, including management and commission costs, can be found elsewhere on this site. ETFs chosen for this study are not recommendations or endorsements for the selection of those particular assets for personal portfolios but rather an unbiased choice based on their relevance to represent a specific market segment and provide appropriate diversification. The fact that I will not be including individual stocks in the portfolio does not mean that I feel that there is no benefit in doing so, merely that I want to keep the study as clean and concise as possible while allowing for the inclusion of all asset classes. Again, check out other posts on this site for the pros and cons of adding individual stocks to your portfolio.

Platinum members may agree or disagree with the ETFs chosen and with some of the constraints that will be imposed during the course of the analyses to be performed. Each investor will have their own (hopefully reasonable) expectations for return and income and their own appetite (or lack thereof) for risk – these are personal choices determined by personal needs, temperament and personality. It is hoped that any discretionary limits imposed will be sufficiently wide to encompass the interests of the majority of members.

The hope is that the analyses will help members better understand the strengths and weaknesses of different strategies, tactics and tools that can be used to implement these methods, and that they will get a better feeling of what to expect from the market and their chosen strategy.

Some of the planned analyses are very time consuming, so do not expect to see posts every day – it will be days, maybe even weeks, between posts. I will attempt to provide a summary post that will highlight the significant aspects of each analysis but the details will be too lengthy to post directly so I will provide a Word file that can be downloaded.

Some of the topics to be covered will be:

  • Diversification
  • Optimization
    • The Efficient Frontier
  • Momentum
  • Risk Management
    • Filters
      • Moving Averages
      • Momentum
      • Options
  • Synergies – Putting it all together

If members have interests not included in the above list they are welcome to suggest additions – if I feel I can usefully expand the study (within reason) I shall be pleased to do so – otherwise, Lowell and/or I may respond outside of the scope of this study.


About HedgeHunter


  1. I highly recommend all readers who have access to the comments section take time to read the above post and follow all the back-testing that is taking place on the Feynman Portfolio. This information will help investors avoid future “Black Swan” events while enhancing return. At least these are the objectives.

  2. Richard Yalmokas says:

    What a wonderful gift of your time and talent to the members. Thank you. It’s probably outside the domain of your studies, but I wonder if something can be said (even via other postings by you and/or Lowell) about proper entry points.

  3. Dick,

    I certainly agree that HedgeHunter is adding significant value to this blog.

    What do you mean by “entry point.” Amplify and we might be able to answer your question.

    BTW, not to jump the publication gun, but I think the ITARR and Momentum-Optimization Model have potential for investors. Stay tuned. In the meantime I plan to continue to use these models with several portfolios so I will have “real time” results.

    The Madison is up for review tomorrow and its IRR is gaining a small amount on the ITA Index.

  4. Richard Yalmokas says:

    Sorry I wasn’t clear. What I mean is: given that the MOM says the top-rated ETF is “whatever”, how do I know that it is not priced at a fair price to buy that ETF? In other words, I don’t want to buy something that is not a good value or pay too much to buy “whatever.”

  5. HedgeHunter says:


    Thank you for your kind comments. I hadn’t really considered the question of entry points because they tend to be a little less important when considering longer term investment horizons – nevertheless they can significantly impact returns – especially if the investor chooses to re-balance frequently – and so I will make a note to comment to the extent it is possible within the constraints of the analyses I shall be providing. This will be easier to cover in certain analyses, such as momentum/relative strength analysis than in other analyses that focus on parameters such as diversification and optimization.

    I could try to cover some concepts of technical analysis such as support/resistance, fibonacci retracements and other common (MACD, RSI and Stochastics) or not-so-common (Directional Index, Aroon etc) Indicators but I think that is outside the scope of this particular study and probably outside the scope of Lowell’s site – I don’t want to detract from and dilute the focus of Lowell’s objectives.

    Lowell has already agreed for me to introduce the concept of using options as a tool for Risk Management and performance enhancement, so that will be new material for most people and we will have to see what the reaction is to determine how deep I will go into these strategies.


  6. Dick,

    What I am testing, with the momentum side of the Optimization-Momentum Model, is the idea that ETFs moving in an upward tend to continue in that direction for extended periods of time. For the short time I’ve been using this approach, most of the portfolios are picking up speed with respect to the ITA Index that is associated with each portfolio. Once the portfolios begin to gain ground on the VTSMX, if this eventually happens, then I will have even more confidence that this model is working as intended.

    HedgeHunter is testing the model going back to include a major bear and bull market movement. Those results should be available to Platinum members in a few months. In the meantime, I’ll continue to apply the principles going forward.

  7. I should say – HedgeHunter is testing several models, not just one.


  8. HedgeHunter says:


    I think I understand your concerns and possible scepticism – until I researched it more deeply about 5 years ago I would never have bought a stock that was at/near the top of a momentum/relative strength ranking list – I always assumed that I had missed the move and that I would be buying the high. However, to date, I’ve found that momentum investing can be very successful. Caveat – the market has been in a strong uptrend over the past 4 years so not too surprising that it may look good. It will be interesting to backtest the Feynman portfolio over the past 6 years to get a better feel for its efficacy. I look forward to doing this but it will probably be at least a couple of weeks before I can get that part of the study completed.


  9. Point of Information: One of my plugins (JetPack) is not working well with the primary overlay (Genesis) that is running on top of my blog. With JetPack installed, you receive notification through e-mail that a new post was uploaded. However, with JetPack installed, the comments section does not work. If I uninstall JetPack, comments can be posted, but you will not receive automatic notification in your e-mail box of new posts. Since I want comments to work I am going to deactivate JetPack. This means regular readers need to check in regularly for the latest blog posts.


  10. Richard Yalmokas says:

    Lowell and David:
    I continue to marvel at your generous sharing, and want to thank you for that.
    David, I understand your comments above, and agree that entry points and TA are outside the scope of your study.
    I can’t wait to learn more about options, and I’m glad you’re adding that to your studies.
    Blessings on you both,

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