Constructed around a core of ten (10) ETFs, the Huygens is globally diversified. In addition to the 10 ETFs that mirror the asset classes of the Rutherford 10, the Huygens includes holdings from past recommendations, plus ETFs that survive Top Tier and PnF Ratio screens. These screens are briefly described below.
Four new ETFs are added to the Huygens investment quiver this month. They are: EUM, SLYG, IHE, and IHF. To make the final list these ETFs passed the basic Kipling LRPC screen. From an initial group of over 100 ETFs, thirty-three (33) made the cut. Those 33 where then whittled down to a maximum of ten (10) before I ran a correlation analysis. IJT was cut from the final list as it has a 0.99 correlation with SLYG, a commission free ETF with TDAmeritrade.
The final screen for inclusion uses the PnF Ratio analysis where RSP is the benchmark.
Huygens LRPC Recommendations: Below are the LRPC recommendations when the Max Number is set to five. There is a tie so six (6) ETFs are recommended.
Huygens Position Sizing Recommendations: Adjusting the Max Trade Position Risk to 1.0%, the Maximum Portfolio Risk is 6.0%. This is a tad higher than the 5% I generally seek, but this portfolio is set up for a longer view so a little more risk is permissible.
Based on the following recommendations, hard choices need to be made. For example, SLYV and SLYG are highly correlated. It does not make a lot of sense to sell SLYV and buy SLYG. Therefore I’ll stand pat with SLYV. IHI is another difficult choice. While it does not make the final five cut, it does have a relatively high Proj-Conv percentage of 8.6%. For this reason, I will hold 100 shares for another month. I plan to reduce the holdings of USRT, but not eliminate the holding as it is still recommended. USRT does not pass the PnF Ratio screen.
Manual Risk Adjustments: With a Maximum Portfolio Risk set to 6.0%, below are the coming changes.
- Sell 400 shares of USRT.
- Buy 500 shares of EUM, a short emerging market ETF. This is going out on a limb and many not be the right choice for most readers of this blog.
- Buy 100 shares of IHF. I would also add 100 shares of IHE, but for insufficient cash.
Huygens Performance Data: With an Internal Rate of Return (IRR) of 14.5%, the LRPC model is working for the Huygens as it is beating every benchmark with exception of Vanguard’s Total Market Index (VTSMX = 16.1%). Let a recession come and the Huygens should pass the VTSMX fund.
The data includes information from 4/30/2017 (launch of IAM software) through 8/1/2018.