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Lowell Herr

 
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  • Ivy-20 Portfolio: Capitalization Or Risk-Adjusted Allocation Plan [View article]
    Brian,

    I'm not sure if the historical data found in the yellow sections of the analysis will answer your question. Normally, I would run the analysis over a five-year period, but some of the investment instruments did not have sufficient data to cover the entire five years.

    Lowell
    Sep 7 08:59 AM | Likes Like |Link to Comment
  • Why I Disagree With William Bernstein [View article]
    Warren Buffett is always the example used to support the argument for active investing. Selecting Buffett at this stage of the game is equivalent to identifying the individual(s) left standing after fifteen coin flips to a packed crowd in Yankee Stadium. Identify the few who will flip 15 consecutive heads before the first flip. Who was touting Buffett in the late 1960s?

    Of course there will be active investors who beat the market over a 40 to 50 year period. The laws of probability dictate such a conclusion. However, the laws of probability and the data on professional management point in a different direction.

    Lowell
    Sep 4 03:34 PM | 1 Like Like |Link to Comment
  • Basic Financial Principles To Consider When Building A Portfolio [View article]
    TIPs are only one hedge or protection against inflation. REITs and equity holdings should provide some protection. However, nothing is certain.

    As for major inflation occurring 40 years ago - that is even a greater reason for being on guard. If interest rates rise to where they were 10 to 12 years ago, interest on the national debt will eat up most of the budget.

    For an extreme position on TIPs, check out Zvi Bodie. Here is one link. http://cnnmon.ie/N2ZLjx

    Lowell
    Aug 31 05:36 AM | Likes Like |Link to Comment
  • Risk Adjusted Portfolio For Retirement [View article]
    Varan,

    Here is my analysis of the VTI, GLD, TLT, SHY portfolio.

    http://bit.ly/PH1Oao

    Lowell
    Aug 24 01:28 PM | Likes Like |Link to Comment
  • Risk Adjusted Portfolio For Retirement [View article]
    Varan,

    Using TLT instead of IEF, and allocating equal percentages to the four ETFs generates the following.

    Projected Return = 5.5%
    Projected SD = 6.1%
    Return/Risk Ratio = 0.9
    Diversification Metric = 51%
    Portfolio Autocorrelation = -16.8%

    Lowell
    Aug 24 08:27 AM | Likes Like |Link to Comment
  • Risk Adjusted Portfolio For Retirement [View article]
    Ben Inker also points out weaknesses in the risk-adjusted or Risk-Parity strategy.

    http://scr.bi/SvI9ig

    Lowell
    Aug 24 08:14 AM | Likes Like |Link to Comment
  • Risk Adjusted Portfolio For Retirement [View article]
    Buyhisellow,

    Not much help as I don't know of the Permanent Portfolio. What is the makeup, percentages, etc.? I assume it is a real portfolio. What kind of risk is associated with the Permanent Portfolio?

    The portfolios in this post are designed to be defensive, not offensive in nature so I would not expect either to outperform a growth portfolio.

    Lowell
    Aug 23 07:18 PM | 1 Like Like |Link to Comment
  • Ivy-20 Portfolio: Capitalization Or Risk-Adjusted Allocation Plan [View article]
    Fruffing,

    I ran a QPP analysis on the 60/30/10 allocation suggested above. The projected return is 4.9% with a projected standard deviation of 9.4%. The Diversification Metric is 40%, which meets our goal. The Portfolio Autocorrelation is 20.5% - an acceptable value.

    I like the low volatility, but the projected return is rather low. The allocation will lag the S&P 500 due to the 40% allocated to bonds and cash.

    Lowell
    Aug 17 11:33 AM | Likes Like |Link to Comment
  • Ivy-20 Portfolio: Capitalization Or Risk-Adjusted Allocation Plan [View article]
    Here is a link to the Faber-Richardson 10-Portfolio. Five years of data is included in this analysis.

    http://bit.ly/NK2331

    When using the Faber 20, some ETFs do not have sufficient data for the analysis.

    Lowell
    Aug 16 05:21 PM | Likes Like |Link to Comment
  • Ivy-20 Portfolio: Capitalization Or Risk-Adjusted Allocation Plan [View article]
    Fruffing,

    The 60/30/10 allocation is easy enough to test.

    Lowell
    Aug 16 01:09 PM | Likes Like |Link to Comment
  • Risk Adjusted Vs. Capitalization Asset Allocation Portfolio Construction [View article]
    My data for the Risk-Adjusted Model is showing an annual return of 7.3% for the four year period, not including dividends.

    Lowell
    Aug 8 09:47 AM | Likes Like |Link to Comment
  • Portfolio Construction Logic: A Concrete Example With ETFs [View article]
    Here is the definition for Portfolio Autocorrelation as provided by QPP developer, Geoff Considine.

    Portfolio autocorrelation is the correlation in portfolio returns from one month to the next. If it is positive then high returns tend to be followed by high returns and vice versa. If portfolio autocorrelation is negative, then the portfolio returns tend to be 'mean reverting' which means that very high return months tend to be followed by returns closer to the mean--the portfolio tends to damp out periods of very high or very low returns.

    Portfolio theory generally assumes that autocorrelation is zero--the random walk. QPP and QRP model the market as though autocorrelation is zero, and the metric shown is for historical performance. If you have a portfolio that shows a lot of positive autocorrelation (absolute value >20%), this is a flag--this means that big swings get amplified.
    Aug 1 02:11 PM | Likes Like |Link to Comment
  • Portfolio Construction Logic: A Concrete Example With ETFs [View article]
    Verrip1,

    DM and PA are proprietary calculation within the Quantext Portfolio Planner software. More information can be found at this site.

    http://www.quantext.com

    It is not easy to find the definition for Portfolio Autocorrelation within this site, so I will look it up on my blog. I need to search there as well. Diversification metric is a quantitative measurement, calculated as a percentage, that provides a clue as to portfolio diversification. Investments with low correlations will raise the percentage. In current market conditions, I prefer DM be 40% or higher. I'll get back to you on PA.

    Lowell
    Aug 1 01:56 PM | Likes Like |Link to Comment
  • Portfolio Construction Logic: A Concrete Example With ETFs [View article]
    I should follow up by mentioning that neither the S&P 500 nor the VTSMX are appropriate benchmarks for the portfolios I track since each portfolio holds assets outside investments contained within those indexes. Therefore I developed a customized benchmark for each portfolio.

    Lowell
    Aug 1 09:19 AM | Likes Like |Link to Comment
  • Portfolio Construction Logic: A Concrete Example With ETFs [View article]
    Varan,

    If you will look at the Historical Data section of the screen shot, you will see the performance data for this portfolio. Granted, that will not tell how well this portfolio will perform in the future. No one can provide that sort of information.

    The best "long-term" data I have is available in the Schrodinger Portfolio found on my blog. Since 12/01/2000 that portfolio outperformed the S&P 500 by 2.2% annually and the VTSMX by 1.3% annually. Those figures account for cash flowing in and out of the portfolio and the data has been confirmed by three commercial programs. Data for ten other portfolios of various size and launch dates are also provided at:
    http://bit.ly/rfwO89

    Lowell
    Aug 1 09:15 AM | Likes Like |Link to Comment
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