Investment Help

If you are seeking investment help, look at the video here on my services. If you are seeking a different approach to managing your assets, you have landed at the right spot. I am a fee-only advisor registered in the State of Maryland, charge less than half the going rate for investment management, and seek to teach individuals how to manage their own assets using low-cost indexed exchange traded funds. Please call or email me if interested in further details. My website is at If you are new to investing, take a look at the "DIY Investor Newbie" posts here by typing "newbie" in the search box above to the left. These take you through the basics of what you need to know in getting started on doing your own investing.

Friday, October 1, 2010

DIY Newbie - Portfolio Analytics - Part 4

Yesterday we had a look at the portfolio holdings and the percentage in each sector of the selected model versus the targeted percentage. This is a live portfolio. Today we want to see what trades need to be done to bring the portfolio back into line with the model.
Again, here is a listing of assets, all low cost, low turnover, exchange traded funds (ETFs):

CLICK TO ENLARGE The bond ETF is CSJ. The account is basically riding out the "bond bubble" by using a short-term (1 to 3 year maturity) corporate bond ETF. Although it gives up a bit in yield and price appreciation if rates drop, it provides protection in the event that rates move higher--which is the greater fear now. The "Big Cap" holding is SPY which tracks the S&P 500. Both CSJ and SPY have transactions costs; the others are commission free.

CLICK TO ENLARGE Next, let's revisit the table showing sector allocations relative to model targets, this time in dollar terms. We see that we need to sell approximately $500 from "Large Cap Equity" and increase "Fixed Income." In the first table above, we see that SPY is at $114.13/share, so we can sell 5 shares; and because CSJ is at $105.05/share, we would buy 5 shares. This would take "Large Cap" to approximate target weighting and overweight "Fixed Income." There are other minor moves that could be made, for example, to reduce cash and increase international slightly.

Notice that reducing stocks fits with the contrarian philosophy because stocks had a spectacular month! Also notice that there is some room, within this disciplined approach, for decision-making, if that's what you want. A 5% leeway, up and down, versus the target percent gives decent wiggle room.

This 4-part series has only touched the surface of the free analytics that are typically available to account holders. The only way to see and understand what is available to you is to get online and explore. You may want to do this with someone who is knowledgeable about investments to get a fuller understanding of the various tools. This is one technology where it pays to learn the full capability.

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