Bohr Asset Allocation Portfolio Review: 24 September 2024

Cockatoo

Bohr is the asset allocation portfolio up for review this morning.  As we approach the end of the third quarter, I have a question.  Do any readers know if Schwab adjusts the price on a limit order when a dividend is pending?  TD Ameritrade made such adjustments on limit orders, but I recall something from Schwab indicating they will not make any price adjustments.  If you have information on this question, post in the Comment section provided below.

If price adjustments are not made on limit orders to account for dividends it may be wise to cancel all limit orders until after third quarter dividends are paid.  The other option is to place the limit order below the anticipated percentage to be paid out in the dividend.

Bohr Asset Allocation

Below is the current portfolio structure for the Bohr.  With over 38,000 in cash most of the asset classes are under target.  Check the far right-hand column to see the percentage each asset class is out of balance.

I have numerous limit orders set for the Bohr, but I do have concerns that some orders are set close to the current price and a dividend payout may result in purchasing shares at a higher than necessary price.  The safest move is to cancel all limit orders until after third quarter dividends are distributed.

Bohr Rebalancing Recommendations

The goal is to keep each asset class within + or – 0.5% of the recommended percentage.  The sixth column from the right identifies the shares needed to bring the asset classes into balance.

The Asset Allocation model is as old as investing.  The percentages I’ve laid out in these AA portfolios closely follows recommendations found in books written by William Bernstein, David Swensen, Richard Ferri, Mebane Faber and Larry Swedroe.

Bohr Performance Data

Since 12/31/2021 the Bohr lags the AOR benchmark.  To know if the portfolio is gaining or losing to this benchmark requires some record keeping and I do that in the last screenshot.  Follow the Information Ratio.

Bohr Risk Ratios

In addition to calculating a few risk metrics, the following table provides directional information on each portfolio.  My favorite risk metric is the Jensen.  The Jensen is known either as the Jensen Performance Index or Jensen Alpha.  When the value is positive the manager of the portfolio is said to be adding value or alpha to the account.  When negative, as is the case with the Bohr, the manager is not adding alpha to the account.  Managers can be fired for lack of adding alpha to an account.

Over the next few months pay attention to the direction of the Jensen and Information Ratios.  Right now the slope of the Jensen is positive and the goal is to keep it moving in that direction regardless which way the broad market moves.

Within the Jensen calculation is a risk-free interest rate.  I use the interest of SHV for this variable.  The current yield for SHV is a relatively high 5.13%.  With the Feds cutting interest rates the SHV dividend should drop.  When this happens it will be a boost to the Jensen.

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