ITA Wealth Management

  • Home
  • Blog
  • Guest Registration
  • Lifetime Member
  • Forum
  • Reset Password
  • Contact Me
  • About Me
You are here: Home / Beginning Investors / Portfolio Requirements: Basic Ideas For Construction

Portfolio Requirements: Basic Ideas For Construction

April 14, 2014 By Lowell Herr

Portfolio Requirements: Basic Ideas For Construction 1

One of 600-800 chapels on Mykonos, Greece

Basic portfolio construction requires that long-term goals include diversification, a risk reduction model, and equity orientation.  Here is how I outline the thinking process when putting together a portfolio of securities.

  • Think diversification through asset allocation.  Each asset class included in the Strategic Asset Allocation (SAA) plan should hold a target percentage that makes it worthwhile, but not so large as to overwhelm the portfolio should that asset class hit a major market bump to the downside.
  • Use non-managed index instruments.  My preference is to use widely held Exchange Traded Funds (ETFs) like those listed below.
  • Long-term investors will tilt the portfolio toward equity ETFs instead of bond ETFs as long-term growth is the goal.
  • Diversify over 8 to 12 asset classes including Cash.  Allocate a minimum of 5% to each asset class with exception of Cash.
  • Include real estate as inflation protection as well as U.S. Treasury Inflation-Protected Securities (TIPs).
  • Both Developed International Equities and Emerging Markets are part of a well-diversified portfolio that has an equity orientation.
  • A broad base of U.S. and International Bonds are available to investors.  Examples are provided below.
  • When possible, use commission free ETFs.
  • Employ a risk reduction model that can be a combination of the SHY cutoff and the ITARR model.  There is a lot more written about the ITA Risk Reduction model on the original blog vs. what you find here on the new site.  Just use the Search engine on the original (http://itawealthmanagement.com) site.

What might a portfolio look like in Dashboard format?  The following Dashboard is from the Euclid after the sale of VUG.  Once Large-Cap Value (VTV) is sold and the under target asset classes are built back to target, this portfolio will look like one that holds true to all the bullet points listed above.

Dashboard

Specific Holdings:

  • U.S. Equities:  VTI, VOE, and VBR.  VOE and VBR are included based on Fama and French research.
  • Bond and Income Investments:  BIV, BND, JNK, LQD, TLT, and TIP.
  • Developed International Equities:  VEA
  • U.S. REITs:  VNQ
  • Emerging Markets:  VWO
  • International REITs:  RWX
  • International Bonds:  BWX and PCY.
(Visited 152 times, 1 visits today)
facebookShare on Facebook
TwitterTweet
FollowFollow us
PinterestSave

Filed Under: Beginning Investors, Critical Material Tagged With: Beginning Ideas, Portfolio Construction

Search

Categories

Recent Posts

  • Rutherford Portfolio Review (Tranche 2): 24 June 2022
  • Bullish Percent Indicators: 24 June 2022
  • Darwin Portfolio Review: 17 June 2022
  • Rutherford Portfolio Review (Tranche 1): 17 June 2022
  • Bullish Percent Indicators: 17 June 2022

Recent Comments

  • Lowell Herr on Bullish Percent Indicators: 17 June 2022
  • Lowell Herr on Bullish Percent Indicators: 10 June 2022
  • Lowell Herr on Bullish Percent Indicators: 10 June 2022
  • Mark Holbrook on Bullish Percent Indicators: 10 June 2022
  • Lowell Herr on Bullish Percent Indicators: 10 June 2022
  • Mark Holbrook on Bullish Percent Indicators: 10 June 2022
  • Lowell Herr on Bullish Percent Indicators: 20 May 2022
  • Lowell Herr on McClintock Portfolio Review: 10 June 2022
  • Lowell Herr on Bullish Percent Indicators: 20 May 2022
  • Steven Lefley on Bullish Percent Indicators: 20 May 2022
  • Lowell Herr on Schrodinger Portfolio Update: 9 June 2022
  • HedgeHunter on Hawking Portfolio Review – 3 June, 2022
  • jayaraman ramakrishnan on Hawking Portfolio Review – 3 June, 2022
  • Lowell Herr on Bullish Percent Indicators: 20 May 2022
  • Nicholas Demopoulos on How To Handle This Selloff: 18 May 2022

Archives

Calendar

July 2022
S M T W T F S
 12
3456789
10111213141516
17181920212223
24252627282930
31  
« Jun    

Users Online

8 Users Online
Users: 1 Guest, 7 Bots

Popular Posts

  • Hawking Portfolio Review – 1 April 2022
  • Investment Policy Statement: February 2022
  • How To Handle This Selloff: 18 May 2022
  • Rutherford Portfolio Review (Tranche 1): 8 April 2022
  • 2022 Guidelines for Relative Strength Portfolios
  • Kepler Portfolio Review: 15 March 2022
  • Hawking Portfolio Review – 1 March 2022
  • Schrodinger Portfolio Review: 4 February 2022
  • Using Volatility as a Diversifier and a Portfolio Hedge
  • Schrodinger Portfolio Review: 10 March 2022

General Investment News

Portfolios coming up for review are:  Huygens, Galileo, Carson Trio, and Einstein.  Non-scheduled portfolios may be reviewed.  If you are a new user, check the posts you missed. Links to Random Posts are found in the lower right-hand footer or just to the right of what you are now reading.  Most popular posts are found in the lower left-hand footer.

Check the Forum for more detailed information.  If you wish to begin a financial discussion, use the Forum.

Contact me at itawealth@comcast.net if interested in a Lifetime Membership.  Long-time Platinum members are now Lifetime members and this blog is free to all who signup as a Guest.  A few blogs are reserved for Lifetime members.

Random Posts

  • Kahneman-Tversky Portfolio Review: 1 April 2022
  • Bullish Percent Indicators: 11 February 2022
  • Rutherford Portfolio Review (Tranche 4): 3 June 2022
  • The Elements of Investing: Part I
  • Keep It Simple
  • Rutherford Portfolio Review (Tranche 4): 14 January 2022
  • Gauss Portfolio Review: 08 April 2022
  • Rutherford Portfolio Review (Tranche 3): 18 March 2022
  • Rutherford Portfolio Review (Tranche 1): 8 April 2022
  • How Much Are You Leaving With Your Financial Advisor?
  • Huygens Interim Update: 22 November 2021

Log in | Website Design by BOING