Most indexes are biased to the large-cap assets. Each month some assets perform better than others. Sector rotation model assumes that from every index we invest say 60%-80% into leading industries and 20%-40% into lagging industry, where within each sector we weight the assets equally [independent of cap]. The rebalancing can probably be performed each …
Benefit of monthly rebalancing
This article recommends monthly asset reallocation with 10-20 weeks lookback. The methods was used for relatively slow indices during profoundly bull market. Probably the allocation frequency depends on market volatility, but should happen at least once a month for most markets. Moreover, the same author mentions that it is best to reallocate at the end …
Never user market orders
This article explains why market orders are bad when low liquidity asset or large order.
Fighting drawdown via aggressive timing
Our main portfolio should be by default diversified and low volatility, basically buy-and-hold type. However we may get long drawdown periods in the main portfolio. To fight the drawdown we use further diversification into yet more markets and cache assets. However all assets are correlated to some extent. To fight this correlation we can use …
How to pick REIT
There are many real estate sectors with varying sensitivities. Picking individual REIT is as tricky as picking a stock, or more. Here is an example of due diligence. And here is a cool list of some REITs. A different REIT combination is here… There is a mild indication of REIT issues ahead of us…
Fortifying market-neutral position
While long-term equity positions are probably the most lucrative positions to hold, they are most prone to luck of market entry. There have been years in which the market did not recover from a systemic event. Consider Japanese markets since 1980-s… There are also large regulatory shifts and events that can modify the market. Therefore …
Portfolio management
Currently the best tool we could find for portfolio management: http://www.investspy.com/calculator This is a free tool with registration. Typically well-balanced portfolio gives ~10% above plain vanilla SPY Example of diversified low risk ETF-only portfolio suitable for IRA ~50k$ allocation [no international, commodity, leveraged]: Ticker Portfolio Weight Risk Contribution Annualized Volatility Beta Daily VaR (99%) Max …
Trading vs investment
This post is more “we believe” than something backed up by numbers. It is easier to make money if trading is limited, however the temptation is too high to give up trending altogether. Trading potentially offers higher returns, but it is very high risk endeavor. It is better if swing or day trading is a …
Choosing the right bank account
Unlike the conventional trading wisdom, in reality our accounts are highly variable: 1. Income: we add (or remove) savings into account of choice every month 2. IRA: the IRA accounts are limited by regulator, taxation and account maturity limitation. It makes sense [taxation-wise] to keep IRA account for ETFs with zero risk of ruin and …
Choosing the right analysis methods
We have 4 predominant approaches to market analysis: 1. Common sense: Choosing the right blend of assets in the first place, buy with discount, not getting greedy, see where the market is going. 2. Psychological: Seasonality, Elliot waves, support/resistance, dead cat bounce, retail investor behavior, algorithmic slippage. 3. Fundamental: Accounting ratios, long term indicators and …