ITA Wealth Management

Below are the details for constructing and managing a portfolio.  The three rules for investing are:  Save, Monitor, and Adjust.

1. Save as much as possible on a monthly basis.
2. Build the portfolio around an asset allocation format, initially using the following 11 Exchange Traded Funds (ETFs).
   VTV    Large-Cap Value
   VOE    Mid-Cap Value
   VBR    Small-Cap Value
   VUG   Large-Cap Growth
   VOT   Mid-Cap Growth
   VBK    Small-Cap Growth
   VEU    International (developed countries)
   VWO   Emerging Markets
   VNQ   REITs
   GSG    Commodities
   BND and/or TIP   Bonds
3. Determine what percentage to invest in each asset class.  Numerous examples are provided on this blog.
4. Use a discount broker such as TDAmeritrade to open up an account.  Set it up for electronic trading.
5. Use the Thomas/Lalla/Herr spreadsheet to monitor the portfolio.  This spreadsheet is available on the Premium Content side of this blog.  Subscribe and download a copy.  If one is not Excel savvy, then manual calculations will be necessary to determine how close the actual investment is to the target.

Example:  Assume 12% is the target for the Mid-Cap Value (MCV) asset class.  Further, assume this is a portfolio with a month end total of $110,234.56.  12% x $110,234.56 = $13,228.15 would be the current target for the MCV asset class.  When the monthly broker statement arrives, you will need to calculate whether the ETF representing this asset class (VOE in our example) is above or below this allocated amount and by what percentage.  Note: If maintained properly, the T/L/H spreadsheet provides this information.

And now the final step and a very important one.  Once cash in the broker account exceeds $1,500 (selected to keep expenses below 1%), invest the cash in the asset class that shows the largest percentage below target.  By doing this each month, one is always feeding the asset class that is the “weakest” in the portfolio.

Photograph:  Visitor to Istanbul, Turkey