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Lowell Herr

 
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  • The Ivy 20 Portfolio: Applying Cluster Weighting Momentum Analysis To Enhance Return [View article]
    Sure Dividend,

    See answers below each of your questions.

    1. Why was 0.65 selected as the correlation cluster threshold?
    I set the correlation value so as to break the number of clusters into 10. Ten (10) is the maximum number of clusters my software will handle. The correlation value generally varies from 0.5 to as high as 0.8. Even at 0.8 one comes up with a diverse portfolio.

    2. Do you weight by volatility after you have determined what correlation clusters and ETFs in which to invest?
    In the ranking of the ETFs, volatility is 20% of the calculation. 50% is allocated to the performance over the past three months (91 days) and 30% to the performance over the past six months (182 days).

    3. Since 11 of the ETFs in the portfolio are in clusters 1 or 2 (which are both highly correlated with equities), why not eliminate some of these ETFs from the portfolio for less correlated ETFs (maybe GLD, VXX, or an int's bond fund)?
    Keep in mind that I am working with the Ivy 20 in this article. I use a different list of ETFs when I set up to construct the portfolios I track. GLD, PCY, BWX, etc. are part of that mix.

    Lowell
    http://itawealth.com
    Jul 30 03:58 PM | Likes Like |Link to Comment
  • 10 Top Investment Books For Developing An Investing Philosophy [View article]
    "Also no one makes any money by beating a benchmark."

    Take the oldest index (benchmark), the DJIA. One made money by topping this index. Therefore I question the accuracy of the above statement.

    As for needing to withdraw cash in a time of need, a good tracking software program (TLH Spreadsheet is an example) takes this into account. It is no different than a fund manager needing to sell stock to meet redemptions.

    Lowell
    Jul 29 11:22 AM | Likes Like |Link to Comment
  • 10 Top Investment Books For Developing An Investing Philosophy [View article]
    "The Intelligent Investor" is appropriate for investors who are stock pickers. However, even Graham in his later years recommended index vehicles as the market, in his opinion, was too efficient to merit the effort that goes into stock evaluations.

    The list of books in this article (and it is an incomplete list) focus on index investing as this is what current research supports as best for the majority of investors.

    Regardless whether one is an active investor or tilts toward index investing, portfolio tracking is essential to measure how successful or unsuccessful one is in portfolio management.

    Lowell
    Jul 29 11:13 AM | Likes Like |Link to Comment
  • 10 Top Investment Books For Developing An Investing Philosophy [View article]
    Steve,

    Touche!

    Lowell
    Jul 29 09:57 AM | Likes Like |Link to Comment
  • 10 Top Investment Books For Developing An Investing Philosophy [View article]
    "Lowell there are millions and millions of investors out there. You really think that every single one can be tracked and investigated to prove your point? If you really think that no one can do it or invest like Warren Buffett if they wanted to? Yes there are 1000's of Steadman's out there however I am sure there are plenty of people out there beating the indexes every year."

    Archman,

    It is not necessary to track every portfolio to make a point. The Nielson rating system is an example of how statistics is used to draw broad conclusions without testing every viewer.

    I don't deny the fact that there are investors who beat the broad U.S. Equities market as represented by the VTSMX index. However, in any given year that number is below well below 50% and as each year passes the winning percentage dwindles.

    If I might ask, what software are you using to track your portfolio performance and what benchmark are you using?

    Lowell
    Jul 29 09:46 AM | 1 Like Like |Link to Comment
  • 10 Top Investment Books For Developing An Investing Philosophy [View article]
    "*Understand that you can outperform the markets and 99% of all professional money managers regardless of what you are lead to believe."

    If one does a serious literature search of portfolio performance vs. stock market, it is quite easy to arrive at the conclusion that the above assertion is false. While there are exceptions, there are thousands of Charlie Steadman's for every Warren Buffett.

    Lowell
    Jul 29 08:40 AM | Likes Like |Link to Comment
  • It's Hard To Beat The Market: A Humbling Year-End Review [View article]
    Investing Doc,

    As for portfolio tracking software, not much is available at an affordable price. Even if the software (Quicken, or example) accurately tracks the Internal Rate of Return (NYSE:IRR) value, what is missing is the ability to track a benchmark.

    A solution is available and it is known as the TLH Software. This Excel program not only tracks the IRR of the portfolio but also handles cash flowing in and out of the portfolio for three benchmarks. In addition, it is possible to set up a customized benchmark. While not perfect, the customized benchmark goes a long way toward telling the user how well their portfolio is performing as measured against their Strategic Asset Allocation plan.

    For more information on the TLH Spreadsheet, click on this link.
    http://bit.ly/1tmMhDN

    I hope you find this helpful.

    Lowell
    http://itawealth.com
    Jul 29 08:17 AM | Likes Like |Link to Comment
  • It's Hard To Beat The Market: A Humbling Year-End Review [View article]
    "Overall, the year-end value of the portfolio (cash included) was $144,026 on a principal of $129,673, a total return of about 11.1%. As I have been contributing regularly to the portfolio over the past year, the average duration of each holding was 166 days; therefore, on an annualized basis, the portfolio would be projected to return 26.4%, with weighted standard deviation of 0.229%. For the period of 25 July, 2013 to 25 July, 2014, the SPY's performance was 19.22%, with a standard deviation of 0.163%."

    Investing Doc,

    Caution: Take extreme care when calculating the portfolio return, particularly when new cash is added or withdrawn during the evaluation period. Look up Beardstown Ladies to see what problems this can lead to. Perhaps you are using an Internal Rate of Return calculation and if so, I'll be quiet.

    Lowell
    Jul 28 09:55 PM | 2 Likes Like |Link to Comment
  • 10 Top Investment Books For Developing An Investing Philosophy [View article]
    At least one of my recommendations covers every one of your concerns. Even the tax code issue is dealt with in the Bogleheads book. If you have read every book on the list and still disagree, then you are entitled to your opinion.

    Lowell
    Jul 28 03:03 PM | 1 Like Like |Link to Comment
  • 10 Top Investment Books For Developing An Investing Philosophy [View article]
    Investor,

    I will not quibble with the "Random Walk" suggestion. Ellis and Malkiel cover similar material in "Elements of Investing" and it is an easier read. My list is anything but complete, but it is designed to get folks started in the right direction.

    Lowell
    http://itawealth.com
    Jul 28 11:41 AM | Likes Like |Link to Comment
  • Cluster Analysis Recommendations: 23 July 2014 [View instapost]
    Bobswee,

    Most of the ETF rankings are for Platinum members, but on occasion it is available for Guest members.

    The software is an Excel program and it is available for Platinum members. To run the Cluster analysis also requires ownership of a program called the Hoadley add-in. This is a program written by Peter Hoadley and the cost is around $140.

    Lowell
    Jul 25 03:26 PM | Likes Like |Link to Comment
  • Cluster Analysis Recommendations: 23 July 2014 [View instapost]
    Bob...,

    I use approximately 30 securities to populate the portfolios tracked over at ITA Wealth Management. Those 30 ETFs (including one stock) are ranked on a regular basis. For example, I am reviewing a portfolio (Kepler) today and there will be a ranking within that review. In addition, the low correlated ETFs will be identified. The rankings are rarely posted on Seeking Alpha.

    Lowell
    http://itawealth.com
    Jul 25 11:08 AM | Likes Like |Link to Comment
  • Cluster Analysis Recommendations: 23 July 2014 [View instapost]
    Yes, today there are nine (9) ETFs. The software permits one to set the number of clusters. In this analysis I set it for the maximum. Cluster 10 is not represented as Cluster 10 ETFs are under-performing SHY.

    I could have limited the number to four or five, but chose not to in this example.

    Lowell
    Jul 23 07:11 PM | Likes Like |Link to Comment
  • Momentum Portfolio Doubles VTSMX Over 11-Year Period [View instapost]
    Raphael,

    The largest one quarter draw-down was 9.8% and it took 7 quarters to recover. This happened in the summer of 2010 after a significant run up.

    Lowell
    Jul 23 03:22 PM | 1 Like Like |Link to Comment
  • Momentum Portfolio Doubles VTSMX Over 11-Year Period [View instapost]
    Yes, this is a very different portfolio as I only used three ETFs. With the "Cluster Analysis" I begin with 30 securities as I want to be sure low correlated offerings are available.

    Lowell
    Jul 23 03:08 PM | Likes Like |Link to Comment
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