Lowell Herr's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.com/user/543572/comments http://seekingalpha.com/article/1458081/comments?source=feed#comment-19211271 19211271
I'm not aware of any sector studies. Probably due to not spending a lot of time building portfolios around sectors. Instead, I use asset classes for portfolio construction purposes, but I do add high ranking sectors as identified in the above article. Right now I hold VNQ in all portfolios and VCR, VHT, and VFH in several.

The momentum article referenced above would guide one away from investing in poor performing ETFs.

Lowell]]> Fri, 24 May 2013 12:18:45 -0400
I'm not aware of any sector studies. Probably due to not spending a lot of time building portfolios around sectors. Instead, I use asset classes for portfolio construction purposes, but I do add high ranking sectors as identified in the above article. Right now I hold VNQ in all portfolios and VCR, VHT, and VFH in several.

The momentum article referenced above would guide one away from investing in poor performing ETFs.

Lowell]]> http://seekingalpha.com/article/1445181/comments?source=feed#comment-18998891 18998891
Yes, the projected Return is plotted on the y-axis and Risk (Volatility or Standard Deviation) is plotted on the x-axis. The developer of the software I am using titles the x-axis as Volatility as the term conveys more meaning than Risk. The risk-free percentage I used for the above calculations was 0.09% and the projected return for the VTSMX was 7.0%. I prefer VTSMX to the S&P 500 at is is a broader measurement of the market and sets a higher bar.

A lot of calculations go into creating the efficient frontier graph, but it is highly dependent on the assets used to create the portfolio. The original analysis of the 40 stocks was posted in an earlier blog post over at ITA Wealth Management. In addition to the individual securities, constraints are placed on each asset class and each individual security. The software operates off these two sets of constraints with the asset class constraint taking precedent. For the individual stocks, I used a maximum constraint of 10%.

Yes, the Return and Volatility are bound together, but it is possible, with a lot of care and analysis, to increase the Return/Volatility ratio.

Lowell]]> Sun, 19 May 2013 12:58:40 -0400
Yes, the projected Return is plotted on the y-axis and Risk (Volatility or Standard Deviation) is plotted on the x-axis. The developer of the software I am using titles the x-axis as Volatility as the term conveys more meaning than Risk. The risk-free percentage I used for the above calculations was 0.09% and the projected return for the VTSMX was 7.0%. I prefer VTSMX to the S&P 500 at is is a broader measurement of the market and sets a higher bar.

A lot of calculations go into creating the efficient frontier graph, but it is highly dependent on the assets used to create the portfolio. The original analysis of the 40 stocks was posted in an earlier blog post over at ITA Wealth Management. In addition to the individual securities, constraints are placed on each asset class and each individual security. The software operates off these two sets of constraints with the asset class constraint taking precedent. For the individual stocks, I used a maximum constraint of 10%.

Yes, the Return and Volatility are bound together, but it is possible, with a lot of care and analysis, to increase the Return/Volatility ratio.

Lowell]]> http://seekingalpha.com/article/1282481/comments?source=feed#comment-18781431 18781431
I am using a modification of the rotation system. For example, I use a 33-Day review period instead of end of the month. This shifts the potential transactions throughout the month so that end-of-the month market action has less impact. There are other advantages to this system that I go into on my blog.

Another change I make is to use the 195-Day Exponential Moving Average instead of the 10-month simple moving average. Again, I think there are several advantages to using the EMA.

A third change employs a momentum factor. From time to time I also discuss this on my blog.

I prefer to be invested in more than three or six ETFs. Again, it is a individual preference. I use the TLH Spreadsheet to track both performance and risk factors of the portfolio.

Lowell]]> Mon, 13 May 2013 16:51:02 -0400
I am using a modification of the rotation system. For example, I use a 33-Day review period instead of end of the month. This shifts the potential transactions throughout the month so that end-of-the month market action has less impact. There are other advantages to this system that I go into on my blog.

Another change I make is to use the 195-Day Exponential Moving Average instead of the 10-month simple moving average. Again, I think there are several advantages to using the EMA.

A third change employs a momentum factor. From time to time I also discuss this on my blog.

I prefer to be invested in more than three or six ETFs. Again, it is a individual preference. I use the TLH Spreadsheet to track both performance and risk factors of the portfolio.

Lowell]]> http://seekingalpha.com/article/1365291/comments?source=feed#comment-18037741 18037741
While I cannot give you the correlation value between RSI and BPI, there is a strong relationship. The RSI, as I have it set, seems to be faster acting, or moves quicker than BPI. When it comes to the Bullish Percent Index, I pay most attention to what the NYSE is doing. When it comes to specific securities, I look at the RSI and "Delta Factor" indicators.

Lowell]]> Wed, 24 Apr 2013 13:11:14 -0400
While I cannot give you the correlation value between RSI and BPI, there is a strong relationship. The RSI, as I have it set, seems to be faster acting, or moves quicker than BPI. When it comes to the Bullish Percent Index, I pay most attention to what the NYSE is doing. When it comes to specific securities, I look at the RSI and "Delta Factor" indicators.

Lowell]]> http://seekingalpha.com/article/1357591/comments?source=feed#comment-17955451 17955451
In other words, the 8.6% return was a real portfolio that you held from 2000-2013. Correct?

Lowell]]> Mon, 22 Apr 2013 19:32:16 -0400
In other words, the 8.6% return was a real portfolio that you held from 2000-2013. Correct?

Lowell]]> http://seekingalpha.com/article/1356261/comments?source=feed#comment-17955371 17955371
If one looks at RWX (#3) and VNQ (#4) you will note that both ETFs showed nearly identical growth percentages over the past 91 days. However, RWX had a greater growth percentage over the past 182 days, 14.6% vs. 12.2% for VNQ. In other words, RWX did not have the same momentum moving from the 182-day to 91-day period. That is why it receives a lower momentum percentage rating compared to VNQ. I hope I am making this a little clearer. It is not the absolute values that are critical, but rather the rates of change that determine momentum

Lowell ]]> Mon, 22 Apr 2013 19:29:16 -0400
If one looks at RWX (#3) and VNQ (#4) you will note that both ETFs showed nearly identical growth percentages over the past 91 days. However, RWX had a greater growth percentage over the past 182 days, 14.6% vs. 12.2% for VNQ. In other words, RWX did not have the same momentum moving from the 182-day to 91-day period. That is why it receives a lower momentum percentage rating compared to VNQ. I hope I am making this a little clearer. It is not the absolute values that are critical, but rather the rates of change that determine momentum

Lowell ]]> http://seekingalpha.com/article/1357591/comments?source=feed#comment-17955081 17955081
Lowell]]> Mon, 22 Apr 2013 19:18:38 -0400
Lowell]]> http://seekingalpha.com/article/1356261/comments?source=feed#comment-17952301 17952301
Number 1 ETF, VHT, grew at 11% over the last 91 days and 14% in the last 182 days whereas number 2 ETF, VPU, grew at 14.2% in the last 91 days and 10.3% over the last 182 days. With those differences momentum of VPU is significantly greater than is the momentum of VHT.

VHT still ranks number 1 due to weighting factors of both performance and volatility.

Lowell
]]> Mon, 22 Apr 2013 17:57:50 -0400
Number 1 ETF, VHT, grew at 11% over the last 91 days and 14% in the last 182 days whereas number 2 ETF, VPU, grew at 14.2% in the last 91 days and 10.3% over the last 182 days. With those differences momentum of VPU is significantly greater than is the momentum of VHT.

VHT still ranks number 1 due to weighting factors of both performance and volatility.

Lowell
]]> http://seekingalpha.com/article/1357591/comments?source=feed#comment-17951731 17951731
Updating takes place when dividends are reinvested and rebalancing takes place. I review each portfolio I track every 33 days. Many times a review ends up putting the portfolio into "neglect mode" for another 33 days.

This blog post helps to distinguish the difference between active, index, and passive investing.

http://bit.ly/XRUzTM

I don't know what an actively managed portfolio would look like as every active managers makes different decisions.

Lowell]]> Mon, 22 Apr 2013 17:48:04 -0400
Updating takes place when dividends are reinvested and rebalancing takes place. I review each portfolio I track every 33 days. Many times a review ends up putting the portfolio into "neglect mode" for another 33 days.

This blog post helps to distinguish the difference between active, index, and passive investing.

http://bit.ly/XRUzTM

I don't know what an actively managed portfolio would look like as every active managers makes different decisions.

Lowell]]> http://seekingalpha.com/article/1356261/comments?source=feed#comment-17926651 17926651
Seeking Alpha picked this article off my blog, something they have the right to do. No, you are not doing anything wrong. I thought a Guest membership gave you access to the Comments. Let me see if I can find the equation, but I'm not sure it will be useful without the complete worksheet. Here is the equation.

=IF(C8>0,2*((Q8-S$1...

Lowell]]> Mon, 22 Apr 2013 08:52:02 -0400
Seeking Alpha picked this article off my blog, something they have the right to do. No, you are not doing anything wrong. I thought a Guest membership gave you access to the Comments. Let me see if I can find the equation, but I'm not sure it will be useful without the complete worksheet. Here is the equation.

=IF(C8>0,2*((Q8-S$1...

Lowell]]> http://seekingalpha.com/article/1356261/comments?source=feed#comment-17893991 17893991
That equation is posted on my blog in some recent comments. There is also a little discussion surrounding this calculation.

You may need to be registered as a Guest to see the comments.

Lowell
http://bit.ly/rfwO89]]> Sun, 21 Apr 2013 09:24:12 -0400
That equation is posted on my blog in some recent comments. There is also a little discussion surrounding this calculation.

You may need to be registered as a Guest to see the comments.

Lowell
http://bit.ly/rfwO89]]> http://seekingalpha.com/article/1352301/comments?source=feed#comment-17870271 17870271
The difficulty with back-testing the optimized portfolio is that it is changing from month to month. I review and update portfolios I track on ITA ( http://bit.ly/rfwO89 ) every 33 days and at that time I make decisions what securities to sell and which to buy. Months can go buy with no recommended changes.

Lowell]]> Sat, 20 Apr 2013 10:57:27 -0400
The difficulty with back-testing the optimized portfolio is that it is changing from month to month. I review and update portfolios I track on ITA ( http://bit.ly/rfwO89 ) every 33 days and at that time I make decisions what securities to sell and which to buy. Months can go buy with no recommended changes.

Lowell]]> http://seekingalpha.com/article/1353891/comments?source=feed#comment-17850071 17850071
I assume you are referring to PRPFX and PAGRX? The latter does not keep up with the market index over the last five years and the former is lagging over the last two years - but does better over a longer period.

Lowell]]> Fri, 19 Apr 2013 17:13:44 -0400
I assume you are referring to PRPFX and PAGRX? The latter does not keep up with the market index over the last five years and the former is lagging over the last two years - but does better over a longer period.

Lowell]]> http://seekingalpha.com/article/1353891/comments?source=feed#comment-17841001 17841001
The projected return for a portfolio with a similar asset allocation is projected to return about 100 basis points above the S&P 500. I use two different software programs to come up with these projections.

As for verification, that needs to wait to see how the investments pan out over the coming years. I do have accurate records for one portfolio going back over 13 years and that portfolio has outperformed the VFINX index fund by 1.8% annually and the VTSMX index fund by 1.1% annually. The asset allocation is not exactly the same as the above allocations to not show how one might favor value over growth. The 13-year portfolio is skewed toward value and it does not hold precious metals, so there are some differences.

I'm not so much interested in back-testing asset allocation plans as one can always set up in-sample data plans that work well. The quest is to set up a plan that will work well with out-of-sample data. Eleven portfolios are tracked on the ITA Wealth Management blog site to see how well these allocation plans perform over a number of years.

Lowell]]> Fri, 19 Apr 2013 13:43:45 -0400
The projected return for a portfolio with a similar asset allocation is projected to return about 100 basis points above the S&P 500. I use two different software programs to come up with these projections.

As for verification, that needs to wait to see how the investments pan out over the coming years. I do have accurate records for one portfolio going back over 13 years and that portfolio has outperformed the VFINX index fund by 1.8% annually and the VTSMX index fund by 1.1% annually. The asset allocation is not exactly the same as the above allocations to not show how one might favor value over growth. The 13-year portfolio is skewed toward value and it does not hold precious metals, so there are some differences.

I'm not so much interested in back-testing asset allocation plans as one can always set up in-sample data plans that work well. The quest is to set up a plan that will work well with out-of-sample data. Eleven portfolios are tracked on the ITA Wealth Management blog site to see how well these allocation plans perform over a number of years.

Lowell]]> http://seekingalpha.com/article/1337311/comments?source=feed#comment-17753801 17753801
Lowell]]> Wed, 17 Apr 2013 16:36:42 -0400
Lowell]]> http://seekingalpha.com/article/1337311/comments?source=feed#comment-17633201 17633201
Check out my blog for more information. The URL is the following.

http://bit.ly/rfwO89

Search for Hoadly, optimization, and optimizer. That should take you to critical blog posts.

Lowell]]> Mon, 15 Apr 2013 07:47:06 -0400
Check out my blog for more information. The URL is the following.

http://bit.ly/rfwO89

Search for Hoadly, optimization, and optimizer. That should take you to critical blog posts.

Lowell]]> http://seekingalpha.com/article/1337311/comments?source=feed#comment-17584061 17584061
Lowell ]]> Sat, 13 Apr 2013 14:07:41 -0400
Lowell ]]> http://seekingalpha.com/article/1337311/comments?source=feed#comment-17549481 17549481
From 12/1/2007 through 3/15/2009 this portfolio, with no changes, lost an annualized 43.9% with a standard deviation of 21.9%. During the same time frame the S&P 500 lost an annualized 49.7% with a similar SD of 21.2%.

I agree with your risk management caution and that is why I try to avoid major downdrafts as we experienced during the last bear market by employing the ITA Risk Reduction model. The ITARR model is a modification of the Faber-Richardson risk reduction model explained in their Ivy Portfolio book. Here is a link explaining the ITARR model.

http://bit.ly/Idrr35

I've upgraded this model slightly, but the above link still provides the core of how the model works.

Lowell]]> Fri, 12 Apr 2013 13:23:04 -0400
From 12/1/2007 through 3/15/2009 this portfolio, with no changes, lost an annualized 43.9% with a standard deviation of 21.9%. During the same time frame the S&P 500 lost an annualized 49.7% with a similar SD of 21.2%.

I agree with your risk management caution and that is why I try to avoid major downdrafts as we experienced during the last bear market by employing the ITA Risk Reduction model. The ITARR model is a modification of the Faber-Richardson risk reduction model explained in their Ivy Portfolio book. Here is a link explaining the ITARR model.

http://bit.ly/Idrr35

I've upgraded this model slightly, but the above link still provides the core of how the model works.

Lowell]]> http://seekingalpha.com/article/1337311/comments?source=feed#comment-17549141 17549141
Since March 15, 2009 through 4/11/2013, if one made no changes in the portfolio (highly unlikely), the IRR is 20.8% with a standard deviation of 14.6%. During the same time frame the S&P 500 rose an annualized 18.1% with a SD of 14.8%.

Lowell]]> Fri, 12 Apr 2013 13:15:53 -0400
Since March 15, 2009 through 4/11/2013, if one made no changes in the portfolio (highly unlikely), the IRR is 20.8% with a standard deviation of 14.6%. During the same time frame the S&P 500 rose an annualized 18.1% with a SD of 14.8%.

Lowell]]> http://seekingalpha.com/article/1325601/comments?source=feed#comment-17462761 17462761
Correct. Mentally I was thinking GTU and that is not part of this portfolio. Thanks for catching my mistake.

Lowell]]> Wed, 10 Apr 2013 15:43:40 -0400
Correct. Mentally I was thinking GTU and that is not part of this portfolio. Thanks for catching my mistake.

Lowell]]> http://seekingalpha.com/article/1325601/comments?source=feed#comment-17359941 17359941
I was curious to see how well the 10 security portfolio performed over the past five years, the time frame I used for the above analysis. The data is available at this URL.

http://bit.ly/11JDw7y


Lowell ]]> Mon, 08 Apr 2013 12:18:33 -0400
I was curious to see how well the 10 security portfolio performed over the past five years, the time frame I used for the above analysis. The data is available at this URL.

http://bit.ly/11JDw7y


Lowell ]]> http://seekingalpha.com/instablog/709762-varan/1726201-x01the-basic-portfolio?source=feed#comment-17315951 17315951
I noted this statement in your article.

"The number of fixed income assets should be as many or preferably more than the number of equity assets."

Is the reason for including fixed income securities to lower portfolio volatility?

Lowell]]> Sun, 07 Apr 2013 07:38:53 -0400
I noted this statement in your article.

"The number of fixed income assets should be as many or preferably more than the number of equity assets."

Is the reason for including fixed income securities to lower portfolio volatility?

Lowell]]> http://seekingalpha.com/instablog/709762-varan/1726201-x01the-basic-portfolio?source=feed#comment-17306311 17306311
A similar set of ETFs available commission free from TD Ameritrade are: VOE, VBR, VEU, VWO, VNQ, DBC, BND, LQD, TLT, IEF (not free), PCY, and BIV. I would also add VTI to cover the entire U.S. Equities market.

Lowell]]> Sat, 06 Apr 2013 15:19:35 -0400
A similar set of ETFs available commission free from TD Ameritrade are: VOE, VBR, VEU, VWO, VNQ, DBC, BND, LQD, TLT, IEF (not free), PCY, and BIV. I would also add VTI to cover the entire U.S. Equities market.

Lowell]]> http://seekingalpha.com/instablog/709762-varan/1726201-x01the-basic-portfolio?source=feed#comment-17306001 17306001
Have you been using this model since 2003 or are these back-tested results?

I'm just in the beginning stages of implementing a momentum/volatility model. The time period I am using for momentum is longer than what you recommend.

Thanks for the notification of the update. Keep me in the loop.

Lowell ]]> Sat, 06 Apr 2013 15:02:20 -0400
Have you been using this model since 2003 or are these back-tested results?

I'm just in the beginning stages of implementing a momentum/volatility model. The time period I am using for momentum is longer than what you recommend.

Thanks for the notification of the update. Keep me in the loop.

Lowell ]]> http://seekingalpha.com/article/1310381/comments?source=feed#comment-17045581 17045581
Lowell]]> Sun, 31 Mar 2013 20:07:36 -0400
Lowell]]> http://seekingalpha.com/article/1282481/comments?source=feed#comment-16721141 16721141
How true. Here is an example of using the function within Excel.
http://seekingalpha.co...
One needs to use judgment in placing constraints on asset classes and individual holdings. Otherwise, the recommendations get rather wild. Both William Bernstein and Harold Evensky warn investors of the dangers related to optimizers.

The raw data, time frames, and other assumptions impact the outcome.

Lowell]]> Sun, 24 Mar 2013 08:48:14 -0400
How true. Here is an example of using the function within Excel.
http://seekingalpha.co...
One needs to use judgment in placing constraints on asset classes and individual holdings. Otherwise, the recommendations get rather wild. Both William Bernstein and Harold Evensky warn investors of the dangers related to optimizers.

The raw data, time frames, and other assumptions impact the outcome.

Lowell]]> http://seekingalpha.com/article/1282481/comments?source=feed#comment-16692051 16692051
The optimizing software is an Excel add-in developed by Peter Hoadley and the cost a little under $140. You can find more at this site.
http://bit.ly/15UtsJU
The program does a lot more than what I use. Again, the last two screenshots are worksheets that have been added to the original program.

Lowell]]> Sat, 23 Mar 2013 07:41:09 -0400
The optimizing software is an Excel add-in developed by Peter Hoadley and the cost a little under $140. You can find more at this site.
http://bit.ly/15UtsJU
The program does a lot more than what I use. Again, the last two screenshots are worksheets that have been added to the original program.

Lowell]]> http://seekingalpha.com/article/1282481/comments?source=feed#comment-16513641 16513641
Unfortunately, one must use the optimization software that is running underneath the worksheets shown above. The optimization software generates the efficient frontier graph. Customized worksheets were added to the original software to create the rankings (second screen shot) and the Buy-Hold-Sell recommendations (third screen shot).


Lowell
]]> Tue, 19 Mar 2013 16:43:45 -0400
Unfortunately, one must use the optimization software that is running underneath the worksheets shown above. The optimization software generates the efficient frontier graph. Customized worksheets were added to the original software to create the rankings (second screen shot) and the Buy-Hold-Sell recommendations (third screen shot).


Lowell
]]> http://seekingalpha.com/article/1278601/comments?source=feed#comment-16406731 16406731
I've been using the 20 ETFs for many years. Most are commission free if one is a client of TD Ameritrade.

The software operating in the background is a an Excel spreadsheet created by Peter Hoadley. Here is the link if interested in purchasing this Excel add-in.
http://bit.ly/15UtsJU

The idea of the Efficient Frontier goes back to 1952 and Nobel Prize winning research by Harry Markowitz. The Hoadley spreadsheet make use of these ideas. One does need to place constraints on both the individual ETFs and broader asset classes. Examples are available on my blog at itawealthmanagement.com.

Lowell]]> Sun, 17 Mar 2013 15:24:23 -0400
I've been using the 20 ETFs for many years. Most are commission free if one is a client of TD Ameritrade.

The software operating in the background is a an Excel spreadsheet created by Peter Hoadley. Here is the link if interested in purchasing this Excel add-in.
http://bit.ly/15UtsJU

The idea of the Efficient Frontier goes back to 1952 and Nobel Prize winning research by Harry Markowitz. The Hoadley spreadsheet make use of these ideas. One does need to place constraints on both the individual ETFs and broader asset classes. Examples are available on my blog at itawealthmanagement.com.

Lowell]]> http://seekingalpha.com/article/1278601/comments?source=feed#comment-16372811 16372811
1) The Efficient Frontier shows the Return/Volatility position of the current portfolio as well as an optimized portfolio.
2) The second slide shows a momentum ranking based on 3 and six months of performance plus a volatility measurement.
3) The third slide provides the reader with information of what moves to make to bring the current portfolio more in line with an optimized asset allocation.

It may takes numerous examples for this approach to make sense.

Lowell]]> Sat, 16 Mar 2013 13:32:43 -0400
1) The Efficient Frontier shows the Return/Volatility position of the current portfolio as well as an optimized portfolio.
2) The second slide shows a momentum ranking based on 3 and six months of performance plus a volatility measurement.
3) The third slide provides the reader with information of what moves to make to bring the current portfolio more in line with an optimized asset allocation.

It may takes numerous examples for this approach to make sense.

Lowell]]>