Portfolio Investing Blog: Portfolioist

Guest post by Contributing Editor, Lowell Herr, ITA Wealth Management. Lowell is a subscriber to the Portfolioist and his investment philosophy is similar to ours.  Enjoy.

Repetition is the mother of all learning. Whether you are a new ITA Wealth Management reader or a long-term follower, there are investing basic that just don’t change, and here are a few.

Suggestions for the Astute Investor:

1.  Follow “The Golden Rule of Investing.” Save as much as you can as early as you can.

2. Develop a Portfolio Policy. This is sometimes called a Strategic Asset Allocation Plan. In simple words this means one will first determine what asset classes to include in the portfolio. We recommend five to seven basic asset classes to include the following:

(2.1) U.S. Equities

(2.2) Developed International Markets

(2.3) Emerging Markets

(2.4) Bonds

(2.5) REITs

(2.6) Commodities (optional)

(2.7) International REITs (optional)

3. Determine what percentage to invest in each asset class. This is where the decisions become both difficult and important.

4. Use non-actively managed vehicles such as index funds or index ETFs. Be wary of stock picking advice. This includes my “Creme List.”

5. Reduce costs. Vanguard now has 100 commission-free ETFs, a tremendous benefit to ETF investors.

6. Understand risk on a quantitative level. We prefer risk be measured using semi-variance rather than mean-variance. This is discussed elsewhere on the ITA blog. Semi-variance risk calculations are built into the TLH spreadsheet and are part of the Sortino Ratio and Retirement Ratio.

7. Set up a spreadsheet to monitor your portfolio. It is essential to properly monitor the portfolio. It is my contention that the vast majority of investors, who actively manage their portfolio, do not track the performance of their portfolio and measure that performance against an appropriate benchmark. As a result, they do not know how poorly the portfolio is performing.

8. Develop an appropriate benchmark as a standard to test portfolio performance. Appropriate is what we attempt to do in the design of the ITA Index benchmark.

9. Read a few of the Top 10 investment books. Recommended on this blog, ITA Wealth Management and here at the Portfolioist.

About Lowell Herr and the ITA Wealth Management Blog:

Lowell Herr is a retired physics teacher with a love of classical music, photography and investing. Lowell began the ITA Wealth Management blog back in 2008. Visit the ITA Wealth Management blog to learn more about Lowell’s investment philosophy and outlook on long-term investing strategies.

Related Links:

• Are 401(k) Fees Consuming 30% of Our Lifetime Savings?
• Are We Hard-Wired to Make Bad Financial Choices?
• Why Mutual Fund Managers May Not Act in Your Best Interest

Disclosure:

The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. ITA Wealth Management is not affiliated with FOLIOfn or the Portfolioist.

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