Apr 21
Passive Portfolio Analysis & Asset Allocation
ITA Wealth Management readers will want to contrast the data table shown below with the recent table when the S&P 500 was at its October 2007 high. The information presented below begins on 4/20/2006 and runs through 4/20/2009.
What we have is three years of historical prices and we compare those percentages with an annualized future performance percentage. Delta is the difference between the two values. When Delta is high, as it is in almost all cases below, it is time to be in the market. If the Delta is low or negative, then it is time to be out of the market. Of course the market is never binary so it is our job to know when to begin moving out of the market and into cash or other asset classes. This is the constant puzzle that requires a solution.
The ETFs that make up the Passive Portfolio are all positive so we consider this to be a strong market signal or a time to be fully invested in ETFs.
This morning I ran an analysis on four portfolios and culled out holdings that showed low Delta values. In those situations, I placed Trailing Stop Loss Orders (TSLOs) as the laws of probability were not on my side for a number of individual stocks and several ETFs. It was time to do some “weeding” of the portfolios. A number of those TSLOs were triggered near the close of the market today.
Lowell Herr
Photograph: Crystal Springs Rhododendron Test Gardens – Portland, OR.
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Sphere: Related Content
April 21st, 2009 at 10:29 am
Readers,
Do any of the tables “bleed” over into the links on the right-hand edge of the page? If so, let me know which ones are causing problems.
Lowell