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I am a long time follower of the market with an interest in the theory and history of financial markets. Historically I've put most of my efforts into my career as a private equity investor, both in companies and now in funds. However, the recent market turmoil has led me to take a much more... More
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  • Change in Allocation 0 comments
    Apr 22, 2010 9:34 AM | about stocks: VSS, DGS, VWO, VNQ, RWX

    With political risk rising in the US following the SEC's civil suit against Goldman, as well as continuing upward trend in bullishness and the markets, I am starting to reallocate to non-equity assets:

    US Equity - Large USLC 5%
    International - Large INTL 5%
    US Equity - Small USSC 16%
    International - Small INTS 10%
    Emerging Markets EM 17%
    Commodities COMM 5%
    REIT   REIT 18%
    VA Reserve   VA 10%
    Bonds   BONDS 10%
    Cash   CASH 5%
      TOTAL     100%

     This portfolio allocation is high on beta with overweights in small stocks, both US and international, as well as emerging markets and REITs overweighted.  The beta, which I hope will lead to alpha, is partly offset by the use of a 10% value averaging reserve.  This is touched on in my earlier post but basically it allows one to buy on the dips and sell on the highs above a gradually upward trending value allocation to each segment.  The division between the VA reserve and cash is artificial in that both contain cash; the division serves to ensure that there are sufficient reserves to backstop the segments where I am applying value averaging.

    Please note that I have recalculated the value path for REITs to start at a lower level.  REIT's had started to take on too large a position in my portfolio, and there was also some element of "selling the good news" in my action given how much REITs have rallied in recent months.  I split the REIT allocation between VNQ (Vanguard US REIT) and RWX (Intl REIT) to maximize diversifcation.

    I have re-added commodities to my allocation with the Permanent Portfolio (MUTF:PRPFX) which contains a mix of assets designed to cope with inflation.

    On emerging markets, to mitigate the risk of a bubble, I am splitting between VWO, the Vanguard index, and DGS, which is a smallcap, higher dividend EM index.

    Disclosure: Long all stocks mentioned
    Stocks: VSS, DGS, VWO, VNQ, RWX
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