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  • 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
  • Risk Parity: What It Is, How It Works, And Why It Matters [View article]
    Hedgewise,

    Taking historical stock and bond volatility records, if one applies very strict risk parity rules, one misses major bull markets such as we experienced since March of 2009. How do you modify the risk parity "rules" so as to not forgo strong bull market moves? Maybe I am missing something in the argument.

    Another question. Why use standard deviation for the risk measurement as money managers want to see volatility to the upside of the reference, but wish to avoid volatility to the downside? Why not use a semi-variance calculation so one does not penalize upside moves?

    Lowell
    http://itawealth.com
    Jan 24, 2015. 12:07 PM | Likes Like |Link to Comment
  • Risk Parity: What It Is, How It Works, And Why It Matters [View article]
    Hedgewise,

    I wrote a short article on this subject some time ago and I have some reservations as to whether this portfolio management model will work going forward since interest rates have a higher probability of rising than continuing to fall. Check out this article and the link to the Edward Qian article.

    http://bit.ly/1zCWcc2

    Lowell
    http://itawealth.com
    Jan 23, 2015. 09:22 AM | Likes Like |Link to Comment
  • Risk Parity: What It Is, How It Works, And Why It Matters [View article]
    Hedgewise,

    I've run some of these risk parity studies as well and I find including TLT makes quite a bit of difference in the results. I believe you include TLT in your results, but I can't be 100% sure. As one reader commented above, will this great performance be repeated? Interest rates dropped for a very long period, enhancing bonds, and will not to be repeated over the next 30 years unless we go into negative territory. I don't plan to employ risk parity over the long-term going forward.

    Lowell
    Jan 23, 2015. 09:01 AM | Likes Like |Link to Comment
  • Protect Profits By Implementing A Risk Reduction Strategy [View article]
    Interesting results. I wonder what the graph would look like if the portfolio were concentrated on the top two or three ETFs? I think you will find the results are much improved.

    Lowell
    Jan 16, 2015. 04:54 PM | Likes Like |Link to Comment
  • Protect Profits By Implementing A Risk Reduction Strategy [View article]
    The correct title of Mebane Faber and Eric Richardson's book is: "The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets."

    Lowell
    Jan 16, 2015. 09:54 AM | Likes Like |Link to Comment
  • Protect Profits By Implementing A Risk Reduction Strategy [View article]
    gman1253,

    Based on all our back-testing studies, weekly reviews are not helpful. Here are some reasons I selected the 33-day review period.
    1) It limits whipsaws. Check out Faber's "Ivy League Portfolio" book.
    2) Going this many days avoids the wash sale rule.
    3) If one is using commission free ETFs with TDAmeritrade, as I do, then one avoids the short-term commission fee.

    Back-testing continues, but so far the 33-day review period appears to serve investors better than waiting six or twelve months to review.

    Lowell
    http://itawealth.com
    Jan 16, 2015. 08:31 AM | Likes Like |Link to Comment
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