ITA Wealth Management

Below is a screen shot of 12 asset class ETFs, 11 sector ETFs, and DVMKX, the proxy for cash.  Special Note:  The “Percentage of Funds” allocated to each asset class and sector is not a recommendation.  Rather, it is an example percentage so the QPP program will generate an average annual return found in the third column.  Were one to allocate a portfolio in this manner, the projected Average Annual Return is to be 9% and the projected Standard Deviation is anticipated to be approximately 16% over the next few months.

At the bottom of the screen shot is the Diversification Metric (DM) percentage.  The 24% value is lower than we prefer and that is just another reason not to use this asset allocation as gospel for your portfolio.

The reason for posting this screen shot is so readers can see what asset classes are projected to do better over the next few months.  One can use this information to tweak, tilt, or what I call – apply Tactical Asset Allocation to the portfolio so as to increase the probability of performing better than the VTSMX benchmark.

When developing a portfolio, under current conditions, our goals are to achieve a 10% return, standard deviation so the Return/Risk ratio is at least 0.70, and have a Diversification Metric of 40% or higher.

Another set of goals would be to key off the S&P projections found down in the gray area of the screen shot.  Triggering off these figures, we want a return in excess of 8.3%, SD below 15.1%, and a DM to meet our prior goal of 40% or higher.

Lowell

Photograph:  For a front view and more information on asset allocation, check out the Premium Content side of this blog.

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