Simplify – simplify. That is the effort with this sample portfolio. The Basic portfolio follows the Occam’s razor principle or to paraphrase – “The simplest solution is most likely the right one”.
The following portfolio is also a good one for beginners as it is not complicated and with the Kipling in place, is easy to manage. While slightly more complicated than Dual Momentum portfolios, it provides additional diversity.
There are several changes in the Main Menu so follow along. Comments are most welcome.
The red arrows point to cells I changed from the default settings found in the Kipling workbook. In all cases, the changes are designed to react faster to market changes. Note that I moved to 13- and 49-trading day look-back periods. I also changed the weights.
The changes are my judgment calls and do not have back-testing data to support these alterations. None of the current ITA portfolios use these settings.
Below is a simple portfolio consisting of ten (10) ETFs. The basic asset classes are covered and they are:
- VTI – U.S. Equities
- VEU – Developed International Equities
- VWO – Emerging Market Equities
- VNQ – U.S. Real Estate
- VNQI – Non-U.S. Real Estate
- SGOL – Gold
- TLT – Long-Term U.S. Treasuries
- AGG – U.S. Aggregate Bonds
- SPHY – High Yield Bonds
- SHV – Short-Term Treasuries
The last five represent asset class or options for when the stock market is in decline. Think of them as “off-ramp” ETFs.
I’ve also adjusted the maximum percentage one can invest in each ETF. Again, these are judgment decisions and may not fit the risk requirements for all investors.
With the investing model set to Buy-Hold-Sell (BHS) and the Target Filter turned off, below are the recommendations when the Maximum Number of Assets is adjusted to five (5). Note that VEU, VWO, VNQ, and SPHY all hit the maximum allowed percentage.
Readers: Examine this portfolio or investment quiver and comment. What changes would you make if you were designing a simple or basic portfolio? If you were to substitute any of the ETFs, which would you remove or include and why?
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