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Lowell Herr

 
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  • 9 Dividend Aristocrats Reward Investors [View article]
    Bikerguy,

    I'm assuming it was a current list as I googled Dividend Aristocrats. I thought about doing a random selection of stocks such as every 9th or 10th stock until my group of nine were filled. Maybe next time.

    Lowell
    Aug 23 09:05 AM | Likes Like |Link to Comment
  • 9 Dividend Aristocrats Reward Investors [View article]
    Galicianova,

    The SHY model does reduce portfolio volatility and that may be important for some investors.

    I have yet to run an analysis where the portfolio review is every 33 days, my normal period for reviewing portfolio. Your statement is certainly true based on the results presented in the article.

    Lowell
    Aug 23 07:49 AM | 1 Like Like |Link to Comment
  • The Swensen 6 Portfolio: How To Reduce Risk And Trounce The Market [View article]
    Nbrege,

    This is not the place to produce all the equations.

    Metric 1 is the performance over the most recent three months or 91 calendar days.
    Metric 2 is the performance over the most recent six months or 182 calendar days.
    Metric 3 is a 10-day mean-variation.

    Lowell
    Aug 22 08:39 PM | 1 Like Like |Link to Comment
  • Dividend Aristocrats Reward Investors [View instapost]
    I'm still in the process of simplifying the Aristotle. As "unwanted" ETFs drop below SHY in performance they will be sold out of the portfolio and the cash will be reinvested in the top performing ETFs. This will likely take a few review cycles.

    Lowell
    Aug 22 05:50 PM | Likes Like |Link to Comment
  • The Swensen 6 Portfolio: How To Reduce Risk And Trounce The Market [View article]
    "I do not trust back tests, they can be gamed to prove whatever you want."

    Hardog,

    I too am skeptical of back testing. Here are a few of my concerns in the above example. In the Swensen 6 plus SHY example we end up with 20% allocated to VNQ and 15% to TLT. Those two ETFs benefited from declining interest rates. That appears to be over, at least for the next 10 years as I expect rates to rise. Keep in mind the allocations we not mine.

    The second benefit in the above study was the Great Recession. Using SHY as a cutoff is a risk reducer and it works quite well in bear markets. The deeper the decline the more effective the model. If one takes this diversified portfolio of six ETFs and starts the analysis in March of 2009, it will not keep up with the total U.S. Equities market (VTSMX). I've shown that with many portfolios.

    In this study there was no finagling to make the results look good. I took third party recommendations and pushed the data back as far as possible.

    As mentioned in another reply, I'm testing these basic principles going forward. That is the true test as to whether this risk reducing model is effective. In the short term the results are positive.

    Lowell
    Aug 22 07:17 AM | Likes Like |Link to Comment
  • 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
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