The Aristotle Portfolio is undergoing a management change and here are two possible approaches.
- Use three ETFs: VTI, TLT, and SHY.
- Run a ranking every review period (every 33 days) and if both VTI and TLT are performing above SHY, invest 75% in the top performer and 25% in the lesser performer.
- If either VTI or TLT fall below SHY in performance, invest 75% in the ETF outperforming SHY and 25% in SHY.
- If both VTI and TLT fall below SHY in performance, invest 100% in SHY.
- Use eight ETFs: VTI, TLT, VEA, VWO, VNQ, RWX, PCY and SHY.
- Run a ranking every review period and if all ETFs are outperforming SHY, invest as follows.
- VTI = 40%
- TLT = 20%
- VEA = 10%
- VWO = 10%
- VNQ = 10%
- RWX = 5%
- PCY = 5%
If one ETF under-performs SHY, take that percentage and invest it in the top performing ETF. As of today, VEA at 10% is under-performing SHY so we would sell VEA and invest that 10% in TLT, the highest performing ETF. If two ETFs under-perform SHY the percentages would go to the top two performing ETFs.
If fewer than four ETFs are outperforming SHY the excess dollars would be invested in SHY. While these guidelines do not cover all possibilities, further explanations would be forthcoming when the particular situations arise.
The second model provides for greater diversification, although there will be periods when it will come close to emulating the first model.
ITA readers are encouraged to comment on either management model.