ITA Wealth Management Review: Catching Up

With new Platinum members joining on a regular basis, and no portfolios up for review today, now is a good time to summarize what this blog is all about.  Long-time readers, and those who have taken the time to read a significant portion of the available material, witnessed an evolution in the investment philosophy of ITA.  The passively managed portfolios (Schrodinger, Copernicus, and Pasteur) still cling to the original Strategic Asset Allocation model as laid out in the Dashboards.  Investment literature is replete with articles advocating a buy and hold approach using index funds or index ETFs.  Advocates of the passive approach say to active managers – “Did you not get the memo?”  ITA portfolios run the gamut from passive to actively managed using options.  There are lots of choices for readers to follow.

When I first began saving and investing, buying individual stocks and/or selecting mutual fund managers were the two primary options.  Many mutual funds charged 8.5% load fees, but I sought out no-load funds as it made little sense to pay a fee that required a 9.3% return just to get back to even.  Index funds did not exist when I first started.  My source of information in the early days was to head to the library and pull Weisenberger Reports off the reference shelf.  I was fortunate to find Max Hein, Michael Price, Helen Hayes, and a few others as fund managers.  Later in my investing life I spent time analyzing stocks, but this happened when everything was going up and even a dolt looked like a Rhodes Scholar.  The late 1990s was a time when self-deception was rampant for individuals selecting stocks.

The tech crash of the early 2000s finally shook me out of the stock picking business, even though it is still tempting.  But I am no longer biting into that apple.  When I retired and was finally able to move money out of mutual funds and into ETFs, my investing career took on new life.  Keep in mind that 403(b) plans carry (or at least did when I began) restrictions that I think are hurtful to employees so I was eager to move holdings from those actively managed mutual funds over to a self-directed IRA plan.  I suspect the regulations are in place to protect employees from themselves.

And now for the philosophy of ITA as it exists today.

• Follow “The Golden Rule” of investing.  I’ve yet to meet anyone who will argue with this rule.
• Use index mutual funds or index ETFs.  While there are successful stock pickers, even the very best eventually fall by the way side.  Just look up the Bill Miller story.  Peter Lynch knew when to retire.  Read William J. Bernstein’s books for a more complete story on the Magellan Fund and how it was not available to the public in the early years when the big returns were generated.
• While the momentum anomaly has been around for years, here at ITA we are just learning about this management style.  Search “momentum” and “Dual Momentum” for more information.  Back-testing continues and reports are passed on to Platinum members when ready for publication.  A special thanks to David, Ernie, and Herb for their time consuming efforts and fine work.  Momentum or Dual Momentum is built into our ETF ranking spreadsheets.
• Spreadsheets:  There are three critical spreadsheets now in use at ITA, and with a few changes to the Tranche 1.6, we can reduce that to two.
  • TLH Spreadsheet – This is the portfolio tracking spreadsheet and I need to send it to readers upon request as it contains macros that become corrupted when stored on PogoPlug.  This SS is only available to Platinum members.
  • What was formerly the Sample Allocation Sheet (SAS) 7.1.x is now the Kipling 8.0.  This is the ETF ranking spreadsheet that combines both Absolute Momentum and Relative Momentum, plus a few other wrinkles.
  • Tranche 1.6 is the latest ETF ranking spreadsheet.  It is possible to change two variables in this SS and have it turn out the same recommendations as the Kipling 8.0.  That is why the Tranche 1.6 can act as two different spreadsheets.
• Diversify globally and focus on low correlated securities.  Examples of this philosophy are exhibited in every ITA portfolio.
• Keep expenses low.  Use commission free ETFs when possible.
• Remember that risk is as important as return.  Reducing risk is one of the hallmarks of the ETF ranking spreadsheets such as the Tranche 1.6.
• Benchmark your portfolio.  For more detailed information, search “benchmark.”
• Read a few of the recommended investment books.  There is nothing like reading a good investment book to focus the mind.

Advice to new ITA Platinum members:  Stay current with the latest blogs.  Be patient as there is a lot of material on this site.  Pick out one or two portfolios to follow and read all past blog entries related to the portfolios of interest.  Read the Feynman Study and material on the Rutherford Portfolio.  In the lower right-hand corner of each page is a randomly selected group of blog entries.  Go to that list on a regular bases and pick out one blog to read.  Ask questions in the Comments section and feel free to begin a topic in the Discussion area of the blog.  This is sometimes called the Forum.

Let me know if you have any questions.