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Change in Allocation

|Includes:DGS, RWX, VNQ, Vanguard FTSE All-World ex-US Small-Cap ETF (VSS), VWO

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:

ALLOCATIONS    TARGET %
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