This week we will review the Rutherford Portfolio with a focus on Tranche 3. This analysis can be compared with Lowell’s earlier post (https://itawealth.com/protecting-capital-using-rutherford-example/) using the same quiver of assets.
First of all we check on recent performance:
where we see the impact of last week’s weakness in the US equity markets.
Checking holdings in all tranches:
we see that Tranche 3 has the lowest exposure to US equities (VTI) of all tranches – and this is reflected in the modestly better (relative) performance seen in the first figure. In addition to VTI we are also holding positions in AGG and GLD in this tranche.
So, let’s take a look at current rankings and recommendations:
where we see a recommendation to Buy positions in VTI and VEA. This means that we need to sell the shares held in AGG and GLD in this tranche and to use the cash to ease into VEA (international equities). I’m not too comfortable with the timing on this, but we’ll stick with the plan/model. Note that, unlike Lowell’s post that showed five Buy recommendations, we only see two recommendations. This is primarily due to the fact that I am using a VTI filter and VEA is the only asset with a higher ranking than VTI. I am also using a 10-day convolution look-back period (and I am assuming that Lowell is using the 90-day default) – but this doesn’t change anything.
Finally, we take a look at the Position Sizing sheet:
where we see that we can buy 400 shares of VEA with the cash generated from the sales of AGG and GLD.
Comparing with Lowell’s analysis you can also see that I have the Maximum Trade Position Risk (MTPR) set to 10% – with a “scary” (calculated) Maximum Portfolio Risk of 30%. However, although probably still too high for many investors, my actual (theoretical) Maximum Portfolio Risk (MPR) is “only” 9.2%. In the current environment I have the SD Multiplier set to 1 SD (with ~30 probability of stops being hit). I can live with this but, if I wanted to reduce risk, I would lower the MTPR risk – e.g. lowering this to 2% would reduce my MPR to ~4-5% (with reduced holdings in the 3 assets held).