ITA Wealth Management

In the November issue of the American Association of Individual Investors Journal (AAII) James B. Cloonan provides an interesting portfolio built around the follow ETFs.  They are: FDM (16%), PRF (16%), RFV (16%), RZV (16%), ICF (16%), GWX (5%), RWX (5%), VEU (5%), and VWO (5%). I’m very familiar with ICF, RWX, VEU, and VWO, but the rest are ETFs I have not used or checked their expense ratios.

What I did was run a QPP on this portfolio and here are the results.

• The projected annual return is 11.8%.  I assume this to be only for the next year.  I want this to be at least 10% and preferably 12% or higher.  Eleven percent is acceptable.
• The Standard Deviation is 15.5%.  I prefer this to be lower than 15%, so it is close.
• The Diversification Metric is 49% or an acceptable figure.
• The Portfolio Autocorrelation is 47.2% or a tad on the high side.  I find it difficult to pull this number into the lower figures so this number is acceptable.

A number of these ETFs have a low correlation with the S&P 500, a desirable feature.

Before purchasing any ETFs, be sure to check on the expenses and compare them with what Vanguard charges as Vanguard has the lowest fees.

Lowell Herr

Photograph: Elan Gallery - West Linn, Oregon

Similar QPP analysis is provided for several portfolios on Premium Content.  Subscription is $6.99 per month.

This morning I walked through ten major asset classes to see which dipped below the July lows and which held up quite well.  Of the “Big Six,” only Mid-Cap Value (VOE) and Small-Cap Value (VBR) have yet to penetrate their July lows.  VOE is close and may break below the July lows before the end of the week.

When it comes to international, emerging markets, REITs, and commodities, only REITs are holding up quite well.

Take a look at the StockChart technicals and one can easily see that value ETFs are doing better than growth ETFs and the international markets are taking a bath.

Premium Content subscriptions available for $6.99 per month.

Over on Premium Content I am beginning a series of entries on Exchange Traded Funds (ETF) web sites.  The first one is the granddaddy of sites, the American Stock Exchange (Amex). I consider this site to be a starting point, but there are errors in the database as pointed out on Premium Content (PC).

As I mentioned on PC, be wary of all the different ETFs.  Don’t be overwhelmed with the vast number.  Rather, stick with the basic ETFs and above all, keep in mind the expense ratio.  We want them as low as possible.  We use Vanguard ETFs, for the most part, for this reason.  In some portfolios we hold iShares as Vanguard did not have ETFs when we first began constructing portfolios around ETFs.

Premium Content subscription available for $6.99 per month.

Lowell Herr

Photograph: The Sagrada Familia or the Antonia Gaudi Cathedral in Barcelona, Spain.  It was impossible to photograph the spires without capturing a construction crane.

Investors will find the Asset Allocation Performance Spreadsheet of interest.  Move to the right-hand edge of this page, scroll down to Links and click on the second option.  Download the Asset.xls spreadsheet.  If you have questions, post them in the Comments section of this entry.

The spreadsheet includes data on eight different asset classes beginning in 1989. Be sure to check out all three worksheets.  The first includes the RAW data.  Performance shows how the asset classes rank from year to year and the third worksheet shows the “Horizontal Performance” or how well each asset class performed over the period studied.

Lowell Herr

Photograph:  Mark Twain sculpture

Additional portfolio management insights are available via Premium Content for $6.99 per month.

The link below provides additional information as to how ETFs many be used.

http://www.exploringetfs.com/?investorType=INDIV&c=DMQ

Lowell Herr

Here is the link to an interview with Richard Ferri. Click on one of the player options to listen to the interview. I think investors interested in ETFs will find Ferri’s comments of use.

Lowell Herr

The asset allocation percentages for the new and renamed “GLW” portfolio are published over on Premium Content. We hope to launch this portfolio tomorrow with some ETF purchases.

The “Creme & Sour” lists as well as the “Top Ten” are also available.

Lowell Herr

Additional shares of PCL (Commodities asset class) and a stock were added to the Mosaic2 portfolio this morning. Details will be made available through Premium Content.

Lowell Herr

Welcome to the Premium Content of Wealth Management. Wealth Management blog now has two parts. Part I includes the original blog material and Part II, Premium Content, will eventually include material no longer posted in the original blog.

Lowell Herr

Photograph: Ocean City, Maryland

The Passive Portfolio (PP) has been in operation since 11/30/2000, and it is the oldest portfolio I am working with using the principles of asset allocation. This portfolio is another testament to the benefits of diversification. Since inception the IRR is 7.8% or below the long-term (80 years) returns for the broad market. However, the 7.8% return exceeds the 4.3% IRR for the VTSMX benchmark. In the nearly eight years of operation, this portfolio survived a deep bear market and a nice bull market since 2003. While 7.8% annual return is not stellar, it is providing a nice 3.5% point cushion over its benchmark.

Photograph: Port of Piraeus, Greece