Since the Aristotle is one of three portfolios where specific information is withheld, in this analysis I am assuming the Aristotle is $100,000 in size. As we are experiencing a flat market, expenses play a major role so I am reducing the number of ETFs to seven and none have expense ratios in excess of 15 basis points. Most are lower.
Aristotle Tranche Recommendations: Five of the seven ETFs are recommended to some degree in the following Tranche Momentum Model. With the portfolio offsets set to 12 and the period between offsets at 1, VTI, VNQ, and TLT are highly recommended. I am not considering BIV as it appears that recommendation will fall off the list in a few trading days.
All of these ETFs are currently priced above their 195-Day Exponential Moving Average (EMA). One major negative is VWO as its absolute acceleration percentage is quite negative. It could be recovering as VWO is one of the two current recommendations based on data captured yesterday.
Position Sizing Recommendations: With the above tranche information in hand we move on to the Position Sizing worksheet where I set the Max Trade Position Risk to 1.1% so the portfolio risk comes in under 6%. You see it is 5.5% in the following slide. The suggested cash position is $17,000, a reasonable number as the Dow Jones Industrial is bouncing around 18,000. I expect it will top 20,000 within the next year.
Risk Reduction Adjustments: In the following worksheet we have the opportunity to take both the tranche and position sizing information and enter the number of shares we wish to buy and sell in and effort to set the portfolio up for the next 33 days. What I did was round the shares to the nearest 50 shares (in most cases) and change the Stop Loss for VNQ from 7% to 5%. Overall, the portfolio now carries a risk of 4.2% and leaves nearly $24,000 in cash.
The above process is the same one I go through with the Aristotle, only I begin with a different sum of money.