ITA Wealth Management

  • Home
  • Blog
  • Guest Registration
  • Lifetime Member
  • Forum
  • Reset Password
  • Contact Me
  • About Me
You are here: Home / Beginning Investors / Retirement Planning Mistake #11

Retirement Planning Mistake #11

January 22, 2015 By Lowell Herr

Bend-tree

Although alluded to in this “mistake series,” an emphasis, or special attention needs to be given to portfolio volatility or risk management.  Even if we are tracking portfolio risk as identified by either the Information Ratio (IR), Sortino Ratio (SR) and/or Retirement Ratio (RR), we need to focus on protecting capital.  Imagine you retired in December of 2007 or just before the Great Recession.  After settling into retirement your portfolio begins to tank.  What do you do to prevent that 30% to 40% draw-down?  If you are invested in the market, there is no way to reduce losses to zero.  What we want to do is keep losses to a manageable level and by manageable that means you don’t need to go back to work.  How do we do this?

Within the Sample Allocation Sheet 7.1.3 there are several “kick-me-out-of-market” options.

  • Sell the security if it is ranked below SHY.  In most of our portfolios we are using ETFs so we sell them when they are ranked below SHY.  Consider this your first line of defense.
  • Sell the security when it is priced below its 195-Day Exponential Moving Average (EMA).  There is a high correlation between this event happening and the security dropping below SHY in the rankings table.
  • Sell or closely monitor any security when the “Golden Cross” turns negative (cell is coded red).  The Golden Cross is the X/O column.  If the price of the 13-Day EMA is above the price of the 49-Day EMA, the Golden Cross is positive and the cell is shows up as green.  But when the 13-Day EMA price drops below the 49-Day EMA, the cell turns red.  This is an advanced warning that a sell may be eminent.

These three simple rules will keep investors out of major trouble when the bear market strikes.

(Visited 207 times, 1 visits today)
facebookShare on Facebook
TwitterTweet
FollowFollow us
PinterestSave

Filed Under: Beginning Investors, Critical Material, Retirement Planning Tagged With: Critical Material, Retirement Planning

Comments

  1. Gleason Guyette says

    January 22, 2015 at 8:14 PM

    Good stuff. I know you use 2 to 3% TSLOs to protect profits. Do you set goals at which time you use TSLOs or just when you think the market is over extended, what ever that is? I have profits in VNQ and TLT even though I have held them only since 2 Jan 2015, but; I would hate to see those profits go away. Maybe not a fair question?

    • Lowell Herr says

      January 23, 2015 at 5:47 AM

      Gleason,

      I would not trade them before at least 30 days passed. Remember, I am more of a long-term investor vs. a short-term trader. I do not want to incur short-term trading fees.

      When possible, I want to hold a security longer than one year so it is taxed at the lower rate.

      Lowell

  2. John Brennan says

    February 8, 2015 at 10:20 AM

    Lowell,

    Should that reference to 7.3.1 be 7.1.3 ? Thanks
    Jack B

    • Lowell Herr says

      February 8, 2015 at 10:54 AM

      Jack,

      Yes is should read 7.1.3 as there is no 7.3.1 version. Congratulations on your close reading skills. I made the correction.

      Lowell

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

  • What the Experts Say About Index Investing
  • Portfolio Performance Data: 8 January 2022
  • Constructing a “Core” Investment Portfolio : Part 3 – Risk Parity and Volatility Targeting
  • Keeping It Simple: Building A Basic Portfolio
  • Carson Trio: April 2021 Review
  • Darwin Portfolio Review: 18 February 2022
  • Bethe Portfolio Review: 23 December 2021
  • William Bernstein Recommends Saving More and Spending Less
  • ITA Performance Over Past Year
  • Bullish Percent Indicators: 21 January 2022
  • Hawking Portfolio Review – 30 September 2021

Log in | Website Design by BOING