Einstein Asset Allocation Portfolio Review: 18 October 2024

Antique Clock – circa 1915

The investment model used by the Einstein takes me back to the 1960s when I was first learning about investing.  The no-profit foundation I was part of for over 30 years used these same principles of Asset Allocation (AA).  This AA investment model is advocated by William Bernstein and Richard Ferri, to name just two authors who are stanch advocates of this system to build wealth.

The Einstein was moved over to the AA model a little over a year ago.  As a result of the switch, holdings in U.S. Equities dominate the asset allocations.  Normally I would not sell shares of VOO to rebalance.  Since it will take too long to bring the portfolio into balance I have placed a 2% TSLO on VOO in hopes of bringing the portfolio into balance before 2025.

The Einstein was a source of educational money for the owner.  Those bills are now paid and we anticipate the owner will begin to replenish the withdraws by regularly adding new cash over the next few years.

Einstein Asset Allocation Model

Below is the current AA makeup of the Einstein.  Note the portfolio is not holding VTI as VOO covers the large-cap U.S. Equities asset class.

Einstein Rebalancing Recommendations

Many of the asset classes will not come into balance until 20 shares of VOO are sold.  I have a 2% TSLO set for VOO, but this order will not be struck so long as the market continues its upward move.  This is not a problem for the Einstein.

The purple arrow points to the rebalancing recommendations to take place over the coming months.

Einstein Performance Data

The Einstein has lagged all possible benchmarks for many months.  With the new AA investing model in place we need to focus on the direction of the Jensen Alpha or Jensen Performance Index.  For that information we move down to the fourth screenshot.

Einstein Risk Ratios

Over the last few months the Jensen is beginning to improve.  Improvement is slow as the slope of the Jensen is still negative.  That should change by early next year unless the coming election fouls up the market.