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Lowell Herr

 
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  • The Swensen 6 Portfolio: How To Reduce Risk And Trounce The Market [View article]
    SVY,

    I use VEA as my "critical" ETF for developed international equities. I sold it yesterday out of the portfolio I reviewed this morning as it is lagging SHY. EFA mirrors VEA so I agree with your comment.

    Lowell
    Aug 21 04:34 PM | Likes Like |Link to Comment
  • The Swensen 6 Portfolio: How To Reduce Risk And Trounce The Market [View article]
    Frank,

    I'm out of DBC as it has been under-performing SHY for a long time. Same with GLD, for those who might include gold in the portfolio.

    Due to the different percentages allocated to the ETFs, the Swensen 6 makes more sense than the Faber-Richardson 5 or even 10.

    I still have concerns that the Swensen 6 turned out as well as it did due to the strong performance from TLT. The probability of a repeat performance from TLT over the next 8 years is very low.

    Lowell
    Aug 21 01:22 PM | Likes Like |Link to Comment
  • The Swensen 6 Portfolio: How To Reduce Risk And Trounce The Market [View article]
    Phenom,

    Good questions. I've had little success using any of the inverse ETFs. They seem to be best suited for day traders. However, I have not used one in a test so I might try it when I run another back-test.

    There was no effort to curve fit either in the selected time frame or metrics used to rank the ETFs. In fact, an effort was made not to try to fit the data to make it look good. The time frame was selected to include a bear and bull market. I am limited as to how far back I can go based on ETF data. I could have selected five to ten dividend aristocrats and run a 20 year test and I think done very well. Unfortunately, SHY did not exist in the 1990s.

    From all the research I've read, momentum works best when rankings concentrate on performance less than one year. That is one reason for selecting the three and six month periods.

    Lowell
    Aug 21 12:01 PM | 2 Likes Like |Link to Comment
  • The Swensen 6 Portfolio: How To Reduce Risk And Trounce The Market [View article]
    Yes, I'm familiar with that model. Varan has written about it here on Seeking Alpha. I think he rebalances every quarter based on performance.

    As mentioned in another question, selecting TLT may be good luck as it has had a great run over the period selected. How will it perform in the future is the question of interest to me.

    Lowell
    http://itawealth.com
    Aug 21 08:07 AM | 1 Like Like |Link to Comment
  • The Swensen 6 Portfolio: How To Reduce Risk And Trounce The Market [View article]
    The ETF is returned to the portfolio when it ranks higher than SHY. Money is pulled out of SHY and reinvested in the ETF according to the assigned percentage.

    Lowell
    http://itawealth.com
    Aug 21 08:03 AM | Likes Like |Link to Comment
  • The Swensen 6 Portfolio: How To Reduce Risk And Trounce The Market [View article]
    The Aristotle strategy is the same as the Swensen with these differences. The ETF makeup is a little different and the portfolio was reviewed at the end of the month rather than every 90 days. I was in error stating it is reviewed every 33 days.

    Lowell
    Aug 21 08:01 AM | Likes Like |Link to Comment
  • The Swensen 6 Portfolio: How To Reduce Risk And Trounce The Market [View article]
    Ken,

    EFA was selected to replace VEU as it has a longer historical record. For my portfolios, I primarily use VEA and VWO to cover the developed international equities and emerging markets.

    Check out The Feynman Study on my blog as that study concentrates investments in the top four performers.

    Lowell
    Aug 21 07:59 AM | Likes Like |Link to Comment
  • The Swensen 6 Portfolio: How To Reduce Risk And Trounce The Market [View article]
    No, taxes are not part of the calculation as they vary so much from individual to individual.

    Lowell
    Aug 21 07:55 AM | 1 Like Like |Link to Comment
  • The Swensen 6 Portfolio: How To Reduce Risk And Trounce The Market [View article]
    #3 is just a 10 day standard deviation or mean variance calculation. The spreadsheet does permit one to vary the number of days and there is also an option to select a semi-variance calculation.

    Lowell
    Aug 21 07:54 AM | Likes Like |Link to Comment
  • The Swensen 6 Portfolio: How To Reduce Risk And Trounce The Market [View article]
    Frankholbert,

    Do you think there would be any interest in seeing how the Faber 5 performs using the "SHY model?" I would need to use EFA as a replacement for VEU as VEU is too new to go back as far as 6/30/2006.

    One problem I have with the Faber 5 is the allocations to DBC and BND. These ETFs are hedges against a down market, but one already is providing protection by selling when the price of the ETF drops below the 200-Day SMA.

    To allocate equal percentages to commodities and the U.S. Equities market makes little sense to me.

    Lowell
    http://itawealth.com
    Aug 20 09:35 PM | 1 Like Like |Link to Comment
  • The Swensen 6 Portfolio: How To Reduce Risk And Trounce The Market [View article]
    User 447425,

    I don't have 10 years of data. In order to provide 8 years of data I actually need more than eight years in order to come up with the ranking calculations.

    The data for the second example comes close to answering your questions. What I would prefer is to have over 15 years of data so I could include the tech bubble. Unfortunately, SHY was launched in July of 2002 so that pushes the tech crash outside the limits of analysis.

    The real question is - will this model work going forward? That is what I am testing and measuring.

    Lowell
    Aug 20 09:25 PM | 1 Like Like |Link to Comment
  • The Swensen 6 Portfolio: How To Reduce Risk And Trounce The Market [View article]
    Gguyette,

    I use the 33-Day review rotation for several reasons, and there is nothing magical about my reasons. 1) It rotates the review throughout the month. The avoids most of the activity that occurs near the end of the month, particularly at the end of quarters when the mutual fund managers tweak their funds. 2) The 33-Day period avoids the wash-sale problems. 3) It avoids short-term trading fees that brokers might levy if one is using commission free ETFs.

    I show the ETF rankings with almost every portfolio review. It is not important for the Schrodinger, Copernicus, and Pasteur as those are passively "managed."

    Lowell
    Aug 20 06:32 PM | Likes Like |Link to Comment
  • The Swensen 6 Portfolio: How To Reduce Risk And Trounce The Market [View article]
    Sbenzian,

    With the real portfolios I track I do use cash. It is easier to back-test if one has an investable ticker and this is where SHY works well. Regardless whether one goes to cash or uses SHY as the "bank," SHY still works well as a reference point for performance comparison.

    The price of SHY changed about $16.00 per share over the past 8 years so I don't expect to see much volatility over the next five.

    Lowell
    Aug 20 05:16 PM | 1 Like Like |Link to Comment
  • The Swensen 6 Portfolio: How To Reduce Risk And Trounce The Market [View article]
    SHY was selected as the cutoff ETF for its low volatility. We are not interested in its relationship with respect to other ETFs other than the volatility factor. We could have selected another ETF, but SHY is commission free for TD Ameritrade clients so it cuts costs when we need to move cash in or out of SHY.

    Hope this makes sense.

    Lowell
    Aug 20 05:06 PM | Likes Like |Link to Comment
  • The Swensen 6 Portfolio: How To Reduce Risk And Trounce The Market [View article]
    SVY,

    Not quite. In the first example there are six ETFs. In the second there are seven ETFs. The three metrics, two related to performance and the third is volatility, are used to rank the ETFs regardless of how many one might use. 40 is the limit my software will handle. I find 30 ETFs is adequate to build a global portfolio. Many fewer are used in the above portfolios.

    ETFs performing below SHY are sold out of the portfolio and the cash is invested in SHY. ETFs performing above SHY are invested to the percentage stipulated by the manager. In the first case I used percentage recommendations from Swensen.

    In the first example the portfolio was reviewed every 90 days. In the second it was at the end of the month. I think I misstated that it was every 33 days. Every 33 days is the period I use to review portfolios.

    Lowell
    http://itawealth.com
    Aug 20 04:54 PM | Likes Like |Link to Comment
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