Our Goal
We focus on developing a balanced portfolio optimization model that systematically minimizes investment risk while targeting investment appreciation. This approach avoids the roller-coaster of momentum trading, eliminates emotional trading and market timing.
Our Balanced Portfolio Framework
We define a set of investment framework goals:
Maximize excess return over risk-free rate while maintaining set risk range
Tactically adjust portfolio to market reality
Eliminate market timing, emotions, hype and other non efficient investment practices
Diversify portfolio and limit exposure per position held
Our model evaluates the different US market and industry sectors as well as international and regional markets, U.S. treasury baskets and risk-free alternatives.
Our model is not a long-term buy & hold strategy, but rather involves tactical asset allocation based on a statistical assessment of asset relationships. Re-evaluation is done on a weekly basis, using a sliding time window. We use low-cost, long and short index ETFs (Exchange Traded Funds) to establish diversification while following broad market sentiment and mitigating risk.
We are here to offer our take on a balanced portfolio theory implementation. One that allows us to invest systematically, without emotions or guesswork, and allows us to measure risk, performance and success in a clear, quantitative way.
At each point of rebalance we run our (still experimental) computational model. The result is a set of ETFs and risk-free allocations. We usually evaluate the portfolio progress on a weekly basis, at the end of each week. When the time comes to rebalance, we trade on the next trading day according to the recommended asset allocation.
Following are the updated results from our ongoing managed portfolio experiment.
Note: results last updated 6/6/2010.
| | Since Inception* | YTD** | Last Week | Std. Dev* | Sharpe Ratio* |
| Our Portfolio | 2.23% | 0.43% | -0.15% | 6.96% | 0.060 |
| S&P 500 | -29.36% | -4.50% | -2.25% | 27.88% | -0.377 |
Risk Free (13-Week T-bill) | 1.767% | 0.05% | 0.0023% | 0.12% | |
* Period starting 12/03/2007 through 6/6/2010
** Since 12/28/2009
Please visit our model portfolio for a more detailed analysis and history of our ongoing, traded portfolio experiment.
You may register to our newsletter to receive notifications on rebalance events or other important changes to our practice. We think that this would be a great learning opportunity to you as it is to us.