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Lowell Herr  

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  • Protect Profits By Implementing A Risk Reduction Strategy [View article]
    Portfolios are reviewed every 33 days and once the decisions are made, the portfolio is placed into "neglect" mode until it comes up for review again. If something major were to happen, I would go back and take a look.

    Three of the tracked portfolios are passively managed. While they are reviewed every 33 days, it is mainly to see if the asset classes are still within target. These portfolios can go years without any attention other than recording dividends and interest. When sufficient cash is available, it is reinvested in the asset classes that are lagging their target percentage.

    Lowell
    http://itawealth.com
    Jan 16, 2015. 08:25 AM | Likes Like |Link to Comment
  • Protect Profits By Implementing A Risk Reduction Strategy [View article]
    The volatility is calculated using the most recent two months of data. 20% of the ranking is allocated to volatility where low volatility is highly valued.

    Lowell
    Jan 16, 2015. 08:20 AM | Likes Like |Link to Comment
  • Modifying The Dual Momentum Strategy [View article]
    IndyDoc1,

    There is not a lot of difference. The "Baker's Dozen" includes VOE and VBR as a way to emphasize smaller cap stocks as well as provide additional potential to move the portfolio toward value. These are anomalies based on Fama-French research.

    Lowell
    http://itawealth.com
    Jan 13, 2015. 12:17 PM | Likes Like |Link to Comment
  • Dividend-Oriented Portfolio Using Low Correlated ETFs [View article]
    GetRealHere,

    I suspect you don't completely understand the "Cluster Analysis" method as that process ferrets out ETFs that have low correlations. Therefore, the ETFs do not move together. Yes, we did have the Great Recession event of 2008 and early 2009 when nearly everything tanked. But that draw-down is mitigated by using SHY as a cutoff security.

    High risk? Not if you understand how SHY is used a risk reducer.

    The portfolio does not hold 20 different ETFs at anyone time. Again, I suggest you reread the article.

    Why did you mention ILYD and MDIV when those securities are not listed as a possible investments?

    Why would anyone purchase PCEF? Check the record or compare it with the U.S. Equities (VTI) as shown in this link.

    http://yhoo.it/1CBgaVi

    FSEMX is a much better choice, but still lags VTI.

    Keep in mind this is not a static portfolio as every effort is made to protect profits. I'm always looking for ways to improve, but your suggestions are not convincing.

    Lowell
    Dec 24, 2014. 08:47 AM | Likes Like |Link to Comment
  • The Importance Of Diversification [View article]
    Mike,

    Here is a graph that underscores your point.

    http://yhoo.it/1wBJnuC

    Opps. Looks like the comparison with VTI was stripped from the graph. Put it in and you will see how well the consumer sector performed vs. the total stock market.

    Lowell
    Dec 15, 2014. 05:17 PM | Likes Like |Link to Comment
  • The Importance Of Diversification [View article]
    Dividend Earner,

    I use asset classes to diversify. If you go to this link you will see a diagram or table showing the various asset classes.

    http://bit.ly/1wzODyM

    In the rebalancing table, I now use VEA for Developed International Markets instead of VEU.

    Lowell
    Dec 15, 2014. 09:14 AM | Likes Like |Link to Comment
  • Dual Momentum: How To Implement Strategy For Higher Returns With Lower Risk [View article]
    2sd,

    Suggest an off-the-shelf program and I'll see if it does what I do manually. I'm not aware of any testing software that applies a semi-variance calculation (inverse Sortino ratio) based on where the ETF is positioned with respect to SHY, the ETF used as a cutoff or "circuit breaker" security.

    Lowell
    http://itawealth.com
    Dec 6, 2014. 12:27 PM | Likes Like |Link to Comment
  • Dual Momentum: How To Implement Strategy For Higher Returns With Lower Risk [View article]
    2sd,

    I recognize that momentum, as an investing model, is an anomaly that has the possibility of failing or diminishing in the future. However, it has proved sufficiently beneficial for such a long time, there is a reasonable probability it will continue into the future. As for running millions of variations, it is not going to happen as it is extremely time consuming to run each test. I'm not a big fan of back-testing as there are too many variations from how actual portfolio management works. For example, in the "real world" one ends up with more dollars invested in cash vs. back-testing models.

    The momentum model I am using is designed to prevent major draw-downs even if it means giving up some returns. The true test will come when the next bear market arrives.

    Sixteen portfolios are reviewed on my blog. One uses options and three are passively managed where there is almost zero trading. Those are the extremes. The remaining 10 are managed using varying degrees of the momentum model. I am following performance trends for 14 of the 16 (Two of the portfolios are tracked by another investor.) portfolios so it will be easy to see how the passively managed portfolios perform with respect to the semi-actively managed portfolios.

    I wish your suggestion were possible.

    Lowell
    http://itawealth.com
    Dec 6, 2014. 08:30 AM | Likes Like |Link to Comment
  • Equity Investing Or Index Investing [View article]
    Chowder,

    "I choose income. It doesn't make me right or wrong, it's my goal, and it was selected to fit my needs."

    This is an important point. Consider the person who is retired and fortunate enough to have a pension, social security, and perhaps non-portfolio income that is sufficient to provide an acceptable lifestyle. That investor is then free to focus on return or return and income, rather than just income. It makes a difference as to the situation one finds themselves.

    Lowell
    Dec 4, 2014. 02:53 PM | 1 Like Like |Link to Comment
  • Equity Investing Or Index Investing [View article]
    Christine,

    Nor do they meet my requirements. This also replies to many high yielding dividend growing stocks.

    Lowell
    Dec 4, 2014. 02:40 PM | Likes Like |Link to Comment
  • Equity Investing Or Index Investing [View article]
    Dnorm1234,

    I agree with your last two paragraphs. While I do not dispute the fact that there are some stock pickers who will outperform the S&P 500 or a more appropriate benchmark, the vast majority do not. However, nearly all the data for this conclusion comes from studying professional money managers rather than individual investors as the data is not available to examine how individuals are performing with their portfolios. Here are some of the advantages I see to Dividend Growth Investing (DGI).

    1. These investors have a plan and it includes saving early in life. This basic idea applies to both indexers and stock picking DGI managers.
    2. DGI investors select their stocks from a list of companies that have long records of success. This reduces the emotional drive to run after high flyers.
    3. DGI investors focus on income vs. overall return as they are interested in providing sufficient income to maintain their living style during their retirement years. This same goal is possible if one chooses to use index funds or ETFs.
    4. While related to point #1, I admire the discipline I see in the DGI community. They also seem to be patient investors with a 30-50 year outlook.

    While I may have missed it among all these comments, DGI investors seem to assume that indexers only use the S&P 500 (SPY) to populate their portfolios and therefore the income is insufficient. This is an incorrect assumption. It is possible to build a portfolio using low-cost, commission free ETFs that also provides adequate income for the retirement years.

    Lowell
    http://itawealth.com
    Dec 4, 2014. 08:11 AM | 2 Likes Like |Link to Comment
  • Equity Investing Or Index Investing [View article]
    Bob,

    While it has been a long time since I read Lowell Miller's book, I recall what I call a "feel good" calculation he pushed in order to emphasize dividends. Miller liked to calculate yield based on original price. Here is an example, based on my memory from reading his book.

    Assume one purchased stock XXX for $50 and it paid a dividend of $2 per share for a yield of 4%. Sometime later the stock rose to $100 and paid a dividend of $4.00 or a yield of 4% - no change. Miller was fond of telling the reader that the yield was actually 8% based on $4.00/$50 (original purchase price) = 8%. The yield did not change, but the "feel good" yield calculation did. This way of calculating yield is misguided at best.

    Lowell
    Dec 3, 2014. 04:06 PM | 1 Like Like |Link to Comment
  • Equity Investing Or Index Investing [View article]
    Chowder,

    If you check the SA ETF screening option, and set the yield to >6%, you will find the ETFs. (http://bit.ly/1jb8qkS#) While I am not recommending one invest in high yield ETFs, I thought I would bring up the idea.

    On a rare occasion I will take a flyer with a high yield ETF in a tax deferred account, but not frequently as they generally lag the total U.S. Equities market.

    You may recall that I wrote an article for SA (http://seekingalpha.co...) that supported your thesis of dividend investing, but it really is a close call, at least over the time frames tested.

    Lowell
    http://itawealth.com
    Dec 3, 2014. 01:22 PM | Likes Like |Link to Comment
  • Equity Investing Or Index Investing [View article]
    If dividends are all important, why not invest in a wide variety of ETFs that have yields higher than 6% or even 10%. The risk is spread out over hundreds of companies. Right now I can find 7 ETFs that have yields in excess of 10%. What is the drawback of such an approach if dividends is all I am after?

    Lowell
    Dec 3, 2014. 11:39 AM | 1 Like Like |Link to Comment
  • Equity Investing Or Index Investing [View article]
    Chowder,

    Thank you for the interesting article. I did not completely understand the following paragraph.

    "The equity portfolio, while underperforming the S&P 500 in total return generated 55.4% more in income. That's a considerable amount of money that the S&P 500 can't make up for in total return and by selling some shares to make up the difference."

    The above paragraph implies that dividends from the equity or dividend oriented portfolio were not part of the Internal Rate of Return (IRR) calculation. I must be missing something. If selling shares of the S&P 500 index cannot make up for the dividend advantage that comes from the equity portfolio, then the equity portfolio must have outperformed the S&P 500 in total return.

    What was the IRR comparison or difference between the S&P 500 index and the equity portfolio over the 20-year period?

    Lowell
    Dec 3, 2014. 07:37 AM | 2 Likes Like |Link to Comment
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