ITA Wealth Management

Expect to see an updated performance data table tomorrow.  Premium subscribers will have access to the latest “Creme List.”  Since this is the last trading day of the month, I will be updating stock prices in preparation for matching the broker accounts with the spreadsheets and Captool data.

I looked at the portfolios this morning and most are gaining ground on the VTSMX benchmark, a bit of a surprise.  It has been a few days since any limit orders were struck.  This to be expected as the market is moving away from orders I set several weeks ago.

Continue to save as much as possible and for those who have yet to develop a portfolio plan, get on that as soon as possible.  Look over the examples provided on this blog.  I will likely put up another portfolio recommended by the American Association of Individual Investors (AAII).

Please sign up for the RSS option so you are reminded when a new post goes up on this blog.  I would also set up an RSS for comments so you know when someone is making a contribution or asking a question.

Lowell Herr

Photographs:  Old railroad tracks once used by a lumber company on the Oregon Coast.

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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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May 28, 2008 was the day this blog had a record number of viewers.  At that time I wrote the following.

Investing review time is here again. Lest one lose sight of the big picture, here are the fundamentals to keep in mind.

• Save regularly and put aside as much as possible.
• Develop an investment plan that fits you and your family.
• Seriously consider the benefits of asset allocation.
• After deciding what asset classes to include in the portfolio, determine what the target percentages need to be for each asset class. We recommend one have between 10 and 20 asset classes so the portfolio is well diversified. Those numbers have will vary depending on how one defines an asset class.
• Do some reading as you develop your investment philosophy. A recommended reading list link is on this page.
• Learn the fundamentals of rebalancing and how this adds value to the portfolio.
• Develop a method for tracking portfolio performance and make sure you have a way to see if the asset classes are close to target.

The above ideas will certainly get you started or keep you going as the portfolio is constructed and maintained.

If you have been following this blog for any length of time, you will conclude the guidelines from May 28, 2008 have changed little.  One slight modification in the above bullets is that I would likely not go as high as 20 asset classes.  Ten to twelve seem sufficient.

Lowell Herr

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