Huygens is the portfolio up for a complete review this morning. This portfolio is patterned after the Hawking, the first of this kind on the ITA site developed by Hedgehunter a few months ago. The Hawking and Huygens are income oriented portfolios and are most effectively used with tax deferred accounts. The owner of this portfolio is holding the Huygens in a self-directed IRA.
Several different investing models are tracked here at ITA Wealth Management.
- Schrodinger is the Robo Advisor or computer managed portfolio. This is a hands off buy and hold portfolio. No management skills are required.
- A second major investing model is the Dual Momentum (DM) approach. Four DM portfolios are tracked here at ITA. The Galilo is the one DM portfolio not involved in the look-back experiment. The three portfolios involved in an experiment are: Franklin, McClintock, and Pauling.
- The third investing model is classified as a Relative Strength approach. If interested in following this model, the portfolios are:
- Huygens is the income model where Closed End Funds are used to populate the portfolio.
- Similar to the Schrodinger is another Buy-Hold-Rebalance portfolios, the Bohr. This portfolio is built around the concepts of Asset Allocation and Market Factors as articulated by the Fama-French Five-Factor anomalies.
Huygens Investment Quiver
Below is the current Huygens portfolio. Before the end of the year the goal is to have the remaining cash invested in a closed end fund (CEF) or funds where the income exceeds 8.0% and the CEF is priced below its net asset value (NAV).
As the portfolio currently stands, the income exceeds the 8.0% goal with a 9.2% income.
Huygens Performance Data
The following performance data gives a picture of what happened over the past year. Keep in mind that the income approach has only been in effect three months. Over the past year the Huygens outperformed its benchmark, the VTHRX target fund. Four possible benchmarks are available within the Investment Account Manager (IAM) software. Appropriate benchmarks are selected by the user of the IAM software.
Huygens Risk Ratios
Of even more importance than the Internal Rate of Return (IRR) is the following data as this table shows how well the Huygens is performing based on risk. Without going into a detailed explanation of all five measurements, concentrate on the Jensen. Jensen is also known as Jensen’s Alpha or the Jensen Performance Index.
The Jensen includes a “risk free” short-term interest rate, the portfolio beta, an appropriate benchmark, and the IRR of the portfolio. Values above zero are considered very good. Check the September, October, November, and the first days of December. This is the period when the Huygens employed the income approach.
Check out the graphs of the variables. I pay less attention to the Treynor as the portfolio beta overwhelms the results when the portfolio is invested in low volatile securities such as bonds and treasuries. The slope of the Jensen is vital as it provides a better historical picture of portfolio performance and the underlying portfolio risk.
Since this review comes early in the month, I’ll revisit and update the Huygens before the new year. Otherwise, sit back and collect dividends.