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Author: gatorswamp Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 250199  
Subject: Asset Allocation in Small IRA accounts Date: 3/5/2013 10:42 AM
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I have from 2 prior employments a few small IRA account that suffer from neglect. I have followed over last few years some of the threads regarding simple ways to invest these dollars with low effort and perhaps market beating returns. I have used Datahelper to read through much of the great research including:

1) Zee's RTW and Decision Moose threads- these no longer seem to be used
2) Tpoto's posts on Fidelity sector funds
3) use of timing
4) Mebane Faber's papers

These 2 accounts are a small part of my entire portfolio. Keeping this diversification in mind, I wondered,

What are people doing now?
Have any of these worked post-discovery to a satifactory return?

One of my accounts is at IB- I believe I can use the SPY sector funds there.

The other is with Fidelity and can't use Index funds, but could use the Fidelity Sector funds.

I am looking for a summary/key tips/suggestion for allocating these two small portfolios with characteristics such as:
1) monthly trades
2) use 1-3 funds to keep it simple
3) use some simple timing such as 99-day, SPY 180 SMA higher than 6 days previously, or SPY above 180 SMA.

Do the experienced members of board have any suggestions for a way to start?
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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 242044 of 250199
Subject: Re: Asset Allocation in Small IRA accounts Date: 3/5/2013 10:53 AM
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[looking for] low effort and perhaps market beating returns
Yeah, the whole world is looking for this. ;-)

How small is "small"? And if this is "a small part of my entire portfolio", then why not just invest them the same way? You do know that you can combine your IRAs into one larger IRA, right? No need to keep them separate, unless you want to.

Do the experienced members of board have any suggestions for a way to start?
You've pretty much listed the key methods we use -- now you just need to decide what you want to do.

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Author: gatorswamp Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 242045 of 250199
Subject: Re: Asset Allocation in Small IRA accounts Date: 3/5/2013 11:01 AM
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One is 15K the other 20K. They could be combined together, but cannot be rolled into my regular one at work which is a 403B. I thought keeping them separate (or into one small one) would be interesting anyway to follow one of these strategies. just wondering what people liked to do with the work that has been done.

thanks!

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Author: opihiman911 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 242053 of 250199
Subject: Re: Asset Allocation in Small IRA accounts Date: 3/5/2013 1:49 PM
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I would combine them together, choose 3 or 4 screens from different families, top 3 with a HTD. Throw in a sector or broad asset strategy and a simple timing like the 99 day no high or the falling SMA. That would give you a diversified portfolio of 10-14 stocks/ETF with each position being worth $2-3K. As your portfolio gets bigger, you can go a little deeper in the screen or add a couple new screens to the mix.

Go search for Tpoto's 'Bernie Screen' and you can see what you can do with 3 great screens and a little simple timing. I believe his original Bernie only held 6 stocks, but still does an amazing job if you stretch it out to 9 stocks. 3 years post discovery returns are still making dust of the SP.

Cory

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Author: JLC Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 242055 of 250199
Subject: Re: Asset Allocation in Small IRA accounts Date: 3/5/2013 2:59 PM
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Combine them if you can.

I personally use Faber's QTAA. You could even narrow that down to 4 ETFs by dropping commodities.

JLC

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Author: tpoto Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 242063 of 250199
Subject: Re: Asset Allocation in Small IRA accounts Date: 3/5/2013 5:01 PM
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Ah, yes, the Bernie Screen- a fav. of mine.
(He should have read this board... too late!!!)

As I recall, it was up about 10% in January
and another 4% in February. SPY up about 7% for
those 2 months.




-----------------------------
31 dec screamers- cbk wgo akam
31 dec safe- mkl sam bmi
28 jan screamers- nflx nls kkd
28 jan safe- mkl sam bmi

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 242070 of 250199
Subject: Re: Asset Allocation in Small IRA accounts Date: 3/5/2013 8:08 PM
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Combine them if you can.
... I personally use Faber's QTAA.

For a beginner who is willing to spend the effort to get a solid education, I whole-heartedly agree with this.
Just don't be like so many beginners who pass through, looking for a no-risk, no effort screen that will give 45% per year.

The biggest challenge for a beginner is to keep from losing big while learning the ropes. You have to know why whatever screen(s) you are using works. Emphasis on "know" and "why". With QTAA, you can see how & why it works. And importantly, QTAA will get you out of the market in the danger periods. Very few other methods or screens will automatically get you out. That's important for anybody, but especially important for a beginner who hasn't yet learned to recognize the warning signs.

I no longer use QTAA, but it was the base from which I began that part of my investments.

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Author: sailrmac Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 242075 of 250199
Subject: Re: Asset Allocation in Small IRA accounts Date: 3/5/2013 8:57 PM
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Unless you combine the two, I don't think MI is a very good idea. Too much trading and slippage for 1-2k investments. Personally I would combine them.

However, if you don't combine them, considering the following:

1.) The accounts are small.
2.) They are in a tax protected accounts.
3.) Most of your funds are in a 403b which almost certainly is pretty limited to stardard stock and bond mutual fund stuff.

Therefore, and this is way out of the box thinking, I would consider using some alternative investment ETF's with high yields.
Maybe:

1/3 in BDCL (leveraged Business Development Co's, yield 12.9%)
1/3 in MORL (leveraged mREIT's, yield 24.8%)
1/3 in MLPL (leveraged MLP's, yield 10.9%)

The yields would be protected from taxes and the assets should move differently than your core holdings in your 403b. But by move differntly I mean major moves. This will be very volatile but also an average yield over 16%.

Anyway, everyone else will think I'm nuts but.... well ya, maybe I am. :)

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Author: Syvash Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 242080 of 250199
Subject: Re: Asset Allocation in Small IRA accounts Date: 3/5/2013 10:33 PM
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I no longer use QTAA, but it was the base from which I began that part of my investments.

Rayvt,

I thought that after much analysis this was one of your preferred selected strategies. What has changed, if I may ask? Have you found a better substituted?

Thanks

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 242110 of 250199
Subject: Re: Asset Allocation in Small IRA accounts Date: 3/6/2013 11:24 AM
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no longer use QTAA, but it was the base from which I began that part of my investments.
...
I thought that after much analysis this was one of your preferred selected strategies. What has changed, if I may ask? Have you found a better substituted?


IMHO, Faber's QTAA is a solid base to start on. Faber himself said, though, that it is somewhat simplistic.

What are the basic characteristics of QTAA?
1* Spreading your money among several assets classes, which are on the whole not highly correlated.
2* Keeping your asset class allocation percentages roughly equally balanced over time.
3* A simple non-emotional, non-subjective rule to tell you when to move between being invested and being in cash.
4* Applying that in/out rule to each asset class independently.

The key thing to keep in mind about QTAA is that it is not meant to increase your return. Its primary benefit is that it gets approximately the same return but with substantially reduced volatility, so you get an improved risk-adjusted return.

I think the most important of these is #3. If that works right, you get a rachet effect. When the market goes up, you ride up with it. When the market goes down, you stay pat.

All this is really important to a beginner. When you are a beginner you don't know anything and it's very easy to unknowingly take on a huge risk. Like Alicia in a recent thread.

What has changed, if I may ask? Have you found a better substituted?
Read all of Faber's blog, and especially read the links he has to Top 10 papers that won various contests. Most of those papers are too complex and/or obscure for me, but a few seemed simple enough for a mere mortal to implement. More importantly, I did what I could to backtest some of them that looked attractive to me. Of the very few remaining, I added that strategy to my portfolio.

Originally I used plain vanilla 5 ETF QTAA with about $2000-$3000 for each of the 5 classes. At $4000-$5000 per class ($20K-$25k) it becomes feasible to split into sub-classes. For example, instead of 20% EFA, use EWU 5%, DJX 5%, EWQ 3%, EWL 3%, EWG 2%, EWA 2%.

When you get above $40K-$50K, I think it's better to add another strategy, so you reorganize to $25K in QTAA and $25K in strategy X.

--------
Based on the OP, I'd suggest combining the accounts and running a straight 5 ETF QTAA. Do this for at least a year. And generate the SMAs and signals yourself, don't depend on other people doing the work for you. Continue your education/reading.

If after a year you haven't done this, and it's still suffering from neglect, throw in the towel and put it into an index fund.

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Author: gatorswamp Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 242128 of 250199
Subject: Re: Asset Allocation in Small IRA accounts Date: 3/6/2013 9:35 PM
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Very good discussion, and thanks!

To clarify, I am not a beginning investor. I have followed this board a long time and have done well with investing.
I did all the homework and reviewed all the threads. I know there is no "easy" solution. There was no mention by me of "no risk", or "no effort".

These funds are a small (<5%) part of my total portfolios, which are well diversified in a number of different things. That being said, following the discussions of asset allocations and reviewing them recently, I was simply looking for real time insight for those that have used them! Some of these strategies seem to have great merit, and was just looking for help with the whittling process, certainly I can and will complete that myself. These might seem to be nice approaches to monies not in my regular line of sight.

Next time I will use a poll maybe :>

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