ITA Wealth Management

These last few months have been a bummer of a market. The AA-Mosaic Portfolio is not immune from the carnage. As of Friday, 3/7/08, the portfolio is down an annualized 34.9% while the VTSMX benchmark is down even further at -49.2%.  The fact that the portfolio is outperforming its benchmark is the only comfort in this race. Bright spots in the portfolio are the two commodities and the emerging markets ETF. Otherwise, everything else is down.  We hope this negative market turns around by late summer or early fall.

The graph is much smaller in this sample.

Here is a Mean Variance Optimization graph that contains the latest data for the fourteen-factor-model we are using to populate the AA-Mosaic Portfolio.  Notice where the “red bullseye” is placed on the return vs. risk curve.  By moving toward the northeast corner, the MVO software is telling us not to invest in bonds (AGG) or small-cap growth (VBK).  Currently, we are not holding any assets in either asset class.

Also note that I have placed constraints on each asset class based upon our target percentages.  For example, VEU will never go higher than 26% or lower than 14% due to the 30% target range limits.

Above or to the left is a sample screen shot for the asset classes that make up the AA-Mosaic Portfolio. If you have any questions related to this graph, just ask. Risk or standard deviation is plotted along the X-axis and Return is plotted along the Y-axis.

Photograph: Mykonos Island, Greece

For those investors who want to supplement their ETF dominated portfolio with a few stocks, here is a list to use for study. Note that not all would be recommended for every portfolio so do your own analysis.

• FDS
• CTSH
• JNJ
• COH
• INFY
• TEVA
• CSCO
• WAG
• MSM
• FISV

Last week we picked up shares of Johnson & Johnson (JNJ) for the AA-Mosaic Portfolio.  We also hold Fastenal (FAST).  FAST is currently ranked number 28 among the stocks we track.

If it is important to follow the “Golden Rule” of investing, what is the penalty for delaying a savings program?

Instead of starting at age 19, suppose you began your savings program immediately after the early starter stopped their investing program.  You begin saving $2,000 per year at age 27 and you continue to save $2,000 per year until age 65.  You are also able to generate a return of 10% per year.  How much will you have in your portfolio at age 65.

Post your answer in the comment box.

Note:  No one will turn in a steady 10% return per year.  We just use the figure for this simple example to illustrate the importance of following the “Golden Rule” of investing.