The Gardner
Gauss is the Sector BPI portfolio scheduled for review this first day of summer. The Gauss uses a few more equity ETFs than some of the other Sector BPI portfolios in that developed international and emerging market equities are investment options. These additions have been a drag on performance as readers will see below.
Gauss Security Holdings
As mentioned above, the Gauss has the option of five different equity ETFs when sectors are out of fashion as is currently the case. Since no sectors are oversold and VDC is not overbought, no action is required from any sectors.
In the following investment quiver the portfolio can be viewed as two portfolios in one. VTI down through VWO form one portfolio as these securities are employed when sectors are out of favor. The second portfolio is made up of eleven sectors and the ETFs range from VAW down through VPU. These sector ETFs take priority when any sectors are oversold or overbought.
Since no sectors are calling for buy or sell decisions we revert to the five equity ETFs for investing opportunities. For guidance we use the next screenshot, Gauss Manual Risk Adjustments, a worksheet that comes out of the Kipling spreadsheet.
Gauss Manual Risk Adjustments
Since VEA is a Hold we will not add more shares. Limit orders are in place to add more shares of VOO, ESGV, and VWO. Since the last update we sold shares of VGT as technology was overbought.
Gauss Performance Data
Since 12/31/2021 the Gauss is trailing the SPY benchmark by a small margin, but outperforming all other potential benchmarks. The reason for the drop below the benchmark is explained below.
Gauss Risk Ratios
For the past 3.5 months the Jensen has been flat, indicating the portfolio is closely following the benchmark when risk is involved. The risk-free interest rate of the short-term treasury (SHV) has been creeping up and this places downward pressure on the Jensen Performance Index. For the first time over the past year the Information Ratio moved into negative territory. The reason will become clear in the last screenshot.
Gauss Sector Portfolio Data
In most Sector BPI portfolios I use only VTI and VOO as equity options when sectors are neither a purchase or sell. Check the performance of ESGV, VEA, and VWO in the following table and you will see my reasoning. None of these three ETFs are contributing significantly to the performance of the Gauss. If this continues I’ll focus more on building up VOO and VTI while neglecting the other three equity securities. I may eventually sell ESGV, VEA, and VWO holdings and use that cash to build up VOO as we are interested in keeping pace with the S&P 500.
Overall, the Sector BPI investing model is working very well for the Gauss when one check the IRR For Period of Sector BPI performance vs SPY performance. Check the colored arrows.
Tweaking Sector BPI Plus Investing Model: Part II
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