ITA Wealth Management

Of the ten portfolios (I have yet to report on three) I am actively tracking, all ten are “passively” managed and all ten are outperforming their VTSMX benchmark.  While this is a limited number of examples, and the age of the oldest portfolio is only eight years old, the data is beginning to mount in favor of passive vs. active investing.  There is an abundance of data to support this argument.  Just read Hebner’s book for more evidence.

I define a passive portfolio to be one where there is little or no active management.  There is a plan for the portfolio and this should occur before any investments are made.  In actual practice this is rarely the case.  Following the plan, investments such as index funds, ETFs, stocks, and bonds are used to populate the portfolio.  Once the plan is in place and the portfolio is fully populated, then the portfolio is on automatic pilot.  Yes, one does need to rebalance the portfolio every one or two years, but this can generally be accomplished by using dividends and new cash to keep the asset classes in balance.

For the portfolios I am tracking, I currently use Quantext Portfolio Planner (QPP) to aid in the development of a Strategic Asset Allocation (SAA) plan.  There will be times when I apply Tactical Asset Allocation (TAA) methods and this is a move away from a passive portfolio.  There are at least two of the ten portfolios where almost no trading occurs.  The oldest passive portfolio averages approximately two trades per year.  This is one buy and one sell order.  That is about as passive as it gets.

When I apply TAA, I try to explain the reasons for doing so.  Those details are available on the Premium side of the blog.

Lowell Herr

Photograph:  Taken about a year ago, bumbees were not plentful this past summer.

Premium subscription available for only $6.99 per month.