Cabo San Lucas
Bethe is a portfolio managed using a simplified version of the Asset Allocation (AA) model. It is much too early to know how this truncated AA model will work during volatile markets. As readers will see in a moment, I am holding a much larger percentage in a short-term treasury ETF (SHV) than normal as there is a high probability the market will move lower due to unforced errors on the part of the current administration. Uncertainty is not a positive where investments are concerned. Disruption seems to be the name of the game so I am playing it safe by holding 60% of the portfolio in a low volatile security.
Bethe Asset Allocation Holdings
Below are the current holdings for the Bethe. SCHD is designed to throw off dividends. Combine with SHV the Bethe will generate a 3.6% yield which is higher than normal for AA portfolios.
Bethe Rebalancing Recommendations
I don’t plan to make any changes at this time. In “normal” times I would be selling shares of SHV and investing the resulting cash in VOO, SCHG, and SCHD. Large holdings in SHV may be the name of the game for several years until we see dramatic changes in tariffs and other behavior that impacts the financial markets.
Bethe Performance Data
Since 12/31/2021 the Bethe has outperformed the AOR benchmark, but trails most of the other tracked benchmarks.
Bethe Risk Ratios
When we examine the Risk Ratio data there is good news and not so good news. The first negative information is that the Sortino Ratio dipped since last October. The Trump Administration has not been good for U.S. Equities. The important Jensen Performance Index has also been in decline since the last election.
Of less importance is the Treynor, also in decline. The good news is the Information Ratio, a head to head comparison with the AOR benchmark. We see a slight uptick. The slope of the Jensen is still positive, but is unlikely to remain such during the remainder of this year.
Holding a high percentage in SHV is creating some resistance to the market decline.
The Bethe is essentially in a wait and see position.
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Last fall, after the election we went to FDIC backed bank CDs. Those recently cashed out. Now we are about 7% SCHO (very similar to SHV) and watching to make our next move. While an Intelligent Portfolio is appealing, the current Schrodinger profile, 80/20 does not seem wise for us as a mid-70s retired couple. Observations?
Lee,
You could test the Schwab Intelligent Portfolio by taking a minimum ($5,000) amount and going through the process of answering their questions. My guess is that Schwab will not recommend an 80/20 stock/(bond + cash) ratio. Likely closer to 50/50 or even lower such as 30/70. I think you can adjust the ratio after the account is set up. Of course this will require Schwab to activate some transactions if you were to make a change in the ratio. I “forced” Schwab to go this aggressive, not what they recommended.
With a minimum dollar amount one is not risking all that much. If you like the ratio and how they handle the account, then add money or a regular basis. If not, then take another route.
Lowell
Thank you.