The following material is posted so Platinum members can prepare for the coming week of investing. I’ll begin with the Efficient Frontier. Efficient Frontier: I set this portfolio up in such a way that the allocations came close to matching the optimizer recommendations. That is why the diamond dot approximates the red dot location. Rankings: […]
Index vs. Passive Investing
Harold R. Evensky, in his Wealth Management: The Financial Advisor’s Guide to Investing and Managing Client Assets book, makes a distinction between index and passive investing. The distinctions can be found at this location. Few readers are unaware of the differences between active and passive management, but the subtle definitions between index and passive management […]
Serious Investors Benchmark Their Portfolio
Establishing an appropriate benchmark for a portfolio is essential if one is serious about investing. Avoiding portfolio bench-marking is an act of self-deception. Exactly what is the purpose of a benchmark and what are the requirements for a fair and reasonable benchmark. Here is one definition of bench-marking. In the investing world, the S&P 500 […]
Buffett vs. Steadman
For every Warren Buffet there are a hundred Charlie Steadman’s in the investing world. While nearly every investor has heard of Buffett, few remember Charlie Steadman. Is there a reason for this short memory? “Until he died at age 83 in 1997, Charlie Steadman burned through investors’ assets at a rate unseen in the fund […]
Diversification Through Correlation Analysis
“It’s not the number of assets that determines diversification, it’s the correlation among them.” – Richard Bernstein Diversification through correlation analysis is another step in our efforts to lower volatility while maintaining a respectable return for the ITA portfolios. In the following example I’ve selected twenty-two (22) ETFs that are frequently used to populate the […]
Correlation Matrix of Critical ETFs
As requested in a comment, here is the correlation matrix of critical ETFs used in nearly all the ITA portfolios. I cut the time frame to 23 months of data so VSS and VNQI did not show up with “short-term” data errors. Identical percentages were assigned to each ETF with exception of SDS. The percentages […]
How to Construct a Portfolio
If you are relatively new to investing or if you have been building a portfolio by selecting individual stocks and find you are under performing the market and wish to switch to index investing, how does one construct a portfolio? Index investing is actually much easier and less stressful than stock picking. Here are the […]
Finding Low Correlated ETFs
In keeping with HedgeHunter’s recent “Cluster Weighting” presentation, finding low correlated ETFs to pair with equity ETFs is essential. The following correlation matrix shows a mixture of highly correlated securities along with modest and low correlated ETFs. Only SDS is negatively correlated and that is strictly due to it being a short ETF. In other […]
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