Tuesday, January 10, 2012
2011 Highly Diversified ETF Portfolio Performance
2011 ended the year with an uptick in the equity markets. Our sample highly diversified balanced portfolio returned a mildly disappointing -2.20% for the year, underperforming the S&P 500 with a positive 2.11% return. Readers might recall the Meredith Whitney prediction of doom for Municipal Bonds. Ironically enough, Municipal Bonds have turned in the best performance of the year in this portfolio. Bonds in general carried the year as International markets got creamed and were the biggest drag on performance.
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I like the fact you highlighted your 2011 picks when most tend to tout their 2012 picks especially if the previous year's picks didn't beat the market! :)
ReplyDeleteActually this is a fine portfolio in my opinion. Well diversified with good exposure to bonds. With proper rebalancing, long term, this portfolio should do fine.
Good post. International and small cap detracted from performance. Other sectors tended to hold their own.
ReplyDeleteI would like to suggest a simple way of investing in exchange traded funds and closed end funds that can greatly increase returns while at the same time lower risk.
ReplyDeleteIm am speaking about exchange traded funds and closed end funds from the perspective of a citizen of the united states. The following may not apply to all investors worldwide. Their are now well over fifty single country funds available and maybe over 100 narrow sectors like airlines steel solar so why the concern for the nasdaq or the standard and poor five hunderd each one of these countries and sectors is a index of and by itself The solar exchange traded fund {TAN} is now down 90% from its high in 2007. If I were a investor or trader I would simply look for any exchange traded fund or closed end fund that does not use any leverage in their porfolios and start buying in the ratio of 0.50 percent of your cash on hand in my account after their is a 75% decline from its all time high and than buy twice as much in the ratio of 1.00 percent of your cash on hand in my account if that exchange traded fund or closed end fund declines another five percent an 80% decline from its all time high buy twice as much in the ratio of 2.00 percent of your cash on hand in my account at a 85% decline from its all time high buy twice as much in the ratio of 4.00 percent of your cash on hand in my account at a 90% decline from its all time high and finally buy twice as much in the ratio of 8.00 percent of your cash on hand in my account at a 95% decline from its all time high. Now I know that some of these funds will not decline 90% from their all time highs. Another thing that you might be wondering about I would run out of money. If I followed that method right wrong example take one hundred thousand dollars. Example Buy 500 dollars of xyz fund at 25 dollars off 75% from its all time high of 100 dollars buy 1000 dollars of xyz at 20 dollars off 80% from its all time high of 100 dollars. Buy 2000 dollars of xyz at 15 dollars off 85% from its all time high of 100 dollars Buy 4000 dollars of xyz at 10 dollars off 90% from its all time high and finally Buy 8000 dollars of xyz at 5 dollars off 95% from its all time high This way you will have your biggest positions in the funds that have declined the most and the smallest positions in the funds that have declined the least. Also keep in mind that if your cash position in your account is say one hundred thousand dollars to start this will gradually decrease as the equity portion of your portfolio increases. Example If your cash position is fifty thousand dollars of your one hundred thousand dollar portfolio you would invest one half of one percent to start which would be two hundred and fifty dollars. Also keep in mind when you buy an exchange traded fund you are buying a basket of stocks so the fund cannot go to zero unlike a stock. Than when any fund has regained three quarters of its value that would be say fund XYZ which traded at 100 dollars five years ago. It now trades at 75 dollars in the case of XYZ. Now you would use a 10% trailing stop loss to protect your gains. So if XYZ declines to 67.50 from 75.00 you would be stoped out insuring that you retain most of your gains. If XYZ continues to rally without correcting by 10% Who knows you may sell out of the stock within 90% of its all time high. Its all time high could be 150 dollars..
And their you have it a simple but brilliant strategy for exchange traded fund and closed end fund investing.