Einstein Portfolio Update

Includes: RWX, TLH, TLT, VB, VBK, VNQ
by: Lowell Herr

Even though the Einstein Portfolio was not due for a review until early next week, no other portfolios are scheduled this week, so I thought I would get a jump on this one. At the end of last month, 60 shares of TLT were sold in order to bring the Bond/Income asset class into balance. As readers can see from the slide shot below, we allocate only 8% to the Bond asset class in this portfolio. We derive income from dividends thrown off from the other ETFs, particularly the investments in RWX and VNQ.

The slide shown below is the dashboard worksheet extracted from the TLH spreadsheet. This worksheet is where we express the Strategic Asset Allocation plan for portfolios. The Einstein Portfolio uses a full 16 asset classes if one includes cash. In this portfolio, we allocate zero percent to cash, as the goal is to be fully invested. Excluding Cash, only three asset classes are out of balance.

Within the TLH spreadsheet is a data table showing how many shares are required to bring the different asset classes back into balance. For example, if we were to sell 13 shares of VB, the Small-Cap Blend asset class would be at target of 3%. Fifty-four shares of RWX would bring International REITs back into balance at 5%. I have a limit order set to purchase 50 shares. Twenty-three shares of VBK would bring Small-Cap Growth up to our target of 3%. With SCB over target and SCG under target, those two asset classes balance out somewhat so I am less concerned about them vs. International REITs.

Note that I am using a 25% threshold for the asset classes in the Einstein Portfolio. My suggestion is to use 25% unless the portfolio is under $50,000. If the portfolio is small, I recommend moving the threshold up to 30% to reduce rebalancing.

[Click all to enlarge]

This particular portfolio has a commanding lead on the VTSMX benchmark. It does lag the ITA Index benchmark, indicating the portfolio has not always been in balance. It is extremely difficult for any of these portfolios to beat the ITA Index.

Take a little time to look over the various holdings and the IRR value for each.