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Lowell Herr  

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  • Dividend Aristocrats: 12 Highest Yielding Stocks For Retirement [View article]
    Lynn,

    If you are suggesting using VTI as the cutoff ETF, that will work so long as VTI is performing quite well. The reason for choosing SHY is the low volatility as that tends to work well in both bull and bear markets. VTI is not adequate as a "circuit breaker" in bear markets.

    Lowell
    http://itawealth.com
    Feb 12, 2015. 01:04 PM | Likes Like |Link to Comment
  • Dividend Aristocrats: 12 Highest Yielding Stocks For Retirement [View article]
    Retirement,

    SHY is the cutoff or "circuit breaker" ETF. Think of it as a reference point where one does not invest in a security that lies below SHY on the ranking scale. In the current situation, as shown in the above ranking table, SHY would hold zero shares as we have plenty of stocks and ETFs performing well above SHY.

    Perhaps I did not make this clear.

    Lowell
    http://itawealth.com
    Feb 12, 2015. 09:24 AM | Likes Like |Link to Comment
  • Dividend Aristocrats: 12 Highest Yielding Stocks For Retirement [View article]
    George,

    Assuming dividends are not needed for income, they are reinvested when the portfolio is reviewed. I tend to reinvest in the top two ranked securities at the time of the review.

    Personally, I primarily use ETFs as my securities of choice as I can come up with low correlated ETFs with a global outreach. If income is desired, one can load up on high yielding ETFs, assuming they are outperforming the cutoff ETF, SHY.

    Lowell
    http://itawealth.com
    Feb 11, 2015. 05:40 PM | Likes Like |Link to Comment
  • Dividend Aristocrats: 12 Highest Yielding Stocks For Retirement [View article]
    Brian,

    I have a friend who has a program written in R that works for back-testing. I submit the data and he runs the tests. I'll just add that we find uncertainty to be a major issue when it comes to back-testing. The return and volatility measurements are highly dependent on the securities selected, starting and ending dates, look-back period, review periods, etc. Back-testing, when carefully examined, is close to "black magic." I think it takes an engineer with a background in uncertainty to appreciate this.

    Instead of relying so much on back-tests, I am meticulously tracking 14 portfolios using both passive and active management models. These are real portfolios in the sense that real money is invested. Internal rates of return are measured as well as several benchmarks. Each portfolio has its own customized benchmark that is modeled after the Strategic Asset Allocation plan laid out for each portfolio.

    I'll leave it at that as this is likely more than you wanted to know.

    Lowell
    http://itawealth.com
    Feb 11, 2015. 05:32 PM | Likes Like |Link to Comment
  • Updating The Baker's Dozen Portfolio: A Slight Modification Of The IVY 10 [View article]
    BlueOkie,

    I just checked and SPY has been operating over 20 years and QQQ has 15 years of history. Both ETFs went through the last two bear markets and dollars continue to flow out of mutual funds into ETFs.

    Lowell
    Feb 10, 2015. 02:13 PM | Likes Like |Link to Comment
  • Updating The Baker's Dozen Portfolio: A Slight Modification Of The IVY 10 [View article]
    BlueOkie,

    Stating that ETFs have "yet to prove their worth" is is equivalent to saying index funds are suspect. All the ETFs I use have endured the Great Recession, truly a bear market of note. Yes, I was using the ETFs mentioned in this article during the Great Recession. ETF price movement simply reflects the price changes of the underlying stocks that make up the ETF.

    Investing in ETFs is one way to reduce portfolio risk and global diversification is accomplished with a few ETFs. That is not easy to do with a few stocks.

    Employing the "circuit breaker" model, described in the article, is useful to moderating major bear markets. This can also be accomplished if one builds a portfolio of individual stocks. Check out this article for an example.

    http://bit.ly/1z4Qz1i

    Check out the data showing the huge floods of money flowing into ETFs.

    Lowell
    http://itawealth.com
    Feb 10, 2015. 12:27 PM | 1 Like Like |Link to Comment
  • Updating The Baker's Dozen Portfolio: A Slight Modification Of The IVY 10 [View article]
    Hardog,

    Would BND work?

    Take a look at this graph, keeping in mind TLT was part of our portfolios for the last few years. Hope the link works.

    http://yhoo.it/1Fnkk1C#{%22range%22%3A%225y%...

    Lowell
    Feb 8, 2015. 05:37 PM | Likes Like |Link to Comment
  • Updating The Baker's Dozen Portfolio: A Slight Modification Of The IVY 10 [View article]
    Zkmg01,

    Yes, I am aware of the new GMOM product. 1) There is too little history to cause me to purchase this security. 2) The expense ratio is 0.94 and that is a heavy burden to overcome. 3) Active managed funds have a very poor track record.

    One reason I might buy 5 to 10 shares is just to track the results to see how well they perform compared to the total market.

    I have strong reservations regarding the back-testing of products. The variables impacting results are too many to go into here. The scattering of the test results are amazing based on starting periods, models used for ETF rankings, selection of ETFs, etc.

    Lowell
    http://itawealth.com
    Feb 6, 2015. 12:00 PM | 1 Like Like |Link to Comment
  • Updating The Baker's Dozen Portfolio: A Slight Modification Of The IVY 10 [View article]
    More information on the "Baker's Dozen Model" can be found by following The Feynman Study beginning with this blog entry.

    http://bit.ly/1LQmrj3

    Lowell
    http://itawealth.com
    Feb 5, 2015. 11:29 AM | Likes Like |Link to Comment
  • Updating The Baker's Dozen Portfolio: A Slight Modification Of The IVY 10 [View article]
    BlueOkie,

    Yes, I have portfolios with detailed records going back into the 1990s (actually back to the late 1950s without detailed records), but not of this particular model. ETFs used in the Baker's Dozen and Rutherford were not available in the 1990s. Hence the disclaimer.

    I've only been using the SHY cutoff model for less than one year, but the trends with respect to the VTSMX benchmark are positive. All the data is published over at http://itawealth.com for interested readers.

    I should mention that there is data going back to 2006 that backs up the model explained for the Baker's Dozen.

    Lowell
    Feb 5, 2015. 11:23 AM | Likes Like |Link to Comment
  • Updating The Baker's Dozen Portfolio: A Slight Modification Of The IVY 10 [View article]
    SeekingTruth,

    I looked at a few portfolios to see when I last sold DBC and it was back in the summer of 2013. I do maintain a small (generally 5 shares) holding of DBC so I am able to calculate the customized benchmark for the different portfolios.

    Looking at the table, you see why holding TLT and VNQ have increased returns. These ETFs were not "cherry picked" as I've been using them for many years. When I first started using ETFs, instead of picking individual stocks, I used ICF for my domestic REIT. When Vanguard offered their stable of ETFs, I moved from ICF to VNQ. I think I still hold ICF in at least one passively managed portfolio.

    Lowell
    http://itawealth.com
    Feb 4, 2015. 10:29 PM | 1 Like Like |Link to Comment
  • Updating The Baker's Dozen Portfolio: A Slight Modification Of The IVY 10 [View article]
    SeekingTruth,

    Neither am I waiting for a 28% loss in DBC. If you follow the argument, a momentum investor will be out of GLD and DBC.

    Depending on how concentrated you wish to be, right now one would only be invested in TLT and VNQ. Our research shows that investing in only one ETF hinders returns and increases volatility. Two ETFs work best on the return side, but volatility can be reduced slightly by going to three or four of the top performing ETFs.

    Hope this helps a tad.

    Lowell
    http://itawealth.com
    Feb 4, 2015. 06:17 PM | 1 Like Like |Link to Comment
  • Baker's Dozen Portfolio: Improve Return And Reduce Risk [View article]
    IndyDoc1,

    Unfortunately, the software I use to track portfolio performance (TLH Spreadsheet) does not permit the extraction of return data for specific periods. What I can say is that all but one portfolio are performing above what they were a year ago. In addition, all have gained ground on the VTSMX benchmark over the past six weeks.

    Lowell
    Jan 31, 2015. 06:55 AM | Likes Like |Link to Comment
  • Risk Parity: What It Is, How It Works, And Why It Matters [View article]
    Instead of using Risk Parity plus additional hedging methods, I use a ranking system of securities (low correlated when possible) and then stay away from those securities that rank below a low volatile ETF such as SHY. Here is a truncated example of this model. As you can see in the second table, the beta of the portfolio is 0.38 or very low. This is due to a large position in TLT. Using SHY as a "circuit breaker" keeps one out of major bear markets. The model is extremely simple to implement.

    http://bit.ly/1vflCvb

    Lowell
    Jan 30, 2015. 11:09 AM | Likes Like |Link to Comment
  • Risk Parity: What It Is, How It Works, And Why It Matters [View article]
    User...,

    Nobody would be talking about Risk Parity if it did not work in the past. It would not have worked over the past 35 years if we had not been in a period of declining interest rates as those rates were kind to the bond market. It is the positive performance of bonds and treasuries that served the Risk Parity model well for many years. Personally, I don't expect to see that happen again until interest rise and then go through another long decline.

    In case you missed this SA article, take a look as it confirms or questions the future viability of the Risk Parity model. The simple moving average as advocated by Faber and Richardson in their book, "The Ivy Portfolio."

    http://seekingalpha.co...

    Lowell
    http://itawealth.com
    Jan 29, 2015. 04:33 PM | Likes Like |Link to Comment
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