Archive for March, 2011

ETF Asset Allocation Applied To The Ivy Portfolio A Detailed Example Part 2


Last Monday, I took a huge contract; making the trade calculations for each ETF trading with a moving average of 200 days. I thought it was easy… man, this was a lot of trades! Before I jump with the actual calculation, I’ll share a few points to consider first:

#1 There are some trades that I have ignored

In order to list the trades according to the moving average, I have used Google Finance. Since there were moments where the closing price and the moving average were getting crossed every 2 days, I have skipped a few trades. So keep in mind that while it wouldn’t affect much the overall return of each ETF, but it would affect it if you trade with a small amount due to trading fees.

#2 Trading dates might now be completely exact

Since I had to cover 10 years of trade for each, I have decided to use the graphs from Google Finance as I have previously mentioned. However, this doesn’t give all the dates and trade prices (you skip a few days from one point to another on the graph). Nevertheless, the main point of this strategy is still respected; avoid most of the downfall and capture most of the uptrend.

#3 Trading calculations don’t take trading fees into account

I have not taken trading fees into consideration since they do not necessarily play a huge role in yield calculation. As you will see in the trading tables, there are several trades done for each ETF. Therefore, if you want to use the Ivy portfolio strategy, I strongly suggest you use it with a large amount. If you start your portfolio with $10,000, you may end-up eat a lot of your investment return in trading fees.

#4 I have “sold” all ETF on March 7th 2011

In order to have a “final yield”, I have virtually sold all ETF on March 7th 2011 even they were not meant to be sold according to the moving average. This exercise was to give you an idea of what works and what doesn’t with the Ivy Portfolio.

I leave you today with the table and I’ll return on next Monday with my final conclusion on the Ivy Portfolio and the ETF asset allocation model.

BOND ETF; SHY (Starting on August 2nd 2002) (total yield:4.80% vs 3.21%)

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REITS ETF: IYR (Starting on March 2nd 2001) (total yield: 114.29% vs 64.15%)

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US Stock Market: SPY (Starting on March 2nd 2001) (total yield:27.12% vs 6.55%)

[table "14" not found /]

International Stock Market: EFA (Starting on August 24th 2001) (total yield 89.91% vs 46.58%)

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Canadian Stock Market: EWC (Starting on March 2nd 2001) (total yield: 102.69% vs 185.82%)

[table "10" not found /]

Emerging Stock Market: EWZ (Starting on March 2nd 2001) (total yield: 311.24% vs 343.4%)

[table "11" not found /]

ETF Asset Allocation Applied To The Ivy Portfolio – A Detailed Example


Since the beginning of the year, I have written a lot about ETF asset allocation and about an easy way to trade your ETF; The Ivy Portfolio. A few of you were mentioning that the ETF asset allocation model of the Ivy Portfolio was too simple; trading according to the 200 days moving average. An argument that keeps coming back is the following:

“How such simple trading technique can work in such complicated market”

In fact, for the past 10 years, we had our shares of market fluctuations;

– Techno crunch

– Enron, Worldcom and other financial frauds

– The Oil price run

– The Housing market boom

– The Lehman Brothers’failure, Ponzi Schemes and other financial frauds

– The credit crunch

– Huge comeback in 2009

– Government debts problems

This may seem to be quite an argument in order to not use a simple ETF asset allocation model such as the Ivy Portfolio. So I have decided to look at one ETF per asset classed I mentioned in my ETF portfolio model and make a graph of the past 10 years to see when I would be trading them and how much I would ended making.

In order to make my ETF selection, I simply take the biggest one in term of market capitalization (and considering history too in order to make sure I have the longest history to look at the trading possibilities)

Today, I’m leaving you with the graph of each ETF and I’ll come back with my full analysis this Wednesday (March 9th 2011).
BOND ETF; SHY (Starting on August 2nd 2002) (total yield: 3.21%)

REITS ETF: IYR (Starting on March 2nd 2001) (total yield: 64.15%)

US Stock Market: SPY (Starting on March 2nd 2001) (total yield: 6.55%)

International Stock Market: EFA (Starting on August 24th 2001) (total yield 46.58%)

Canadian Stock Market: EWC (Starting on March 2nd 2001) (total yield: 185.82%)

Emerging Stock Market: EWZ (Starting on March 2nd 2001) (total yield: 343.4%)

According to my ETF asset allocation model (and according to the fact that some ETF doesn’t start 10 years ago), the complete yield of this portfolio would have been:

15% ETF US Market 6.55% 0.9825%
15% ETF Canadian Market 185.82% 27.8730%
15% ETF International Market 46.58% 6.9870%
15% ETF Emerging Market 343.40% 51.5100%
20% ETF Real Estate (REIT) 64.15% 12.8300%
20% ETF Bonds 3.21% 0.6420%
100% 100.8245%

So a total yield of 100% over the past 10 years. This Wednesday, we will look at how much we would have been making if we would apply the Ivy Portfolio model.

Do you think we will make more or less money?

Use Individual Policies Instead of Company-Based Programs For Retirement

Personal finance

Are you looking to start investing in your retirement? Maybe you’re already retired and you want to further ensure your economic stability. If so, then you should consider an Individual Retirement Account. IRA’s are a simple way to invest in your future and offer many benefits.

An IRA is a retirement plan solely for the benefit of individuals or their beneficiaries. It’s basically a high yield savings account that offers users huge tax breaks. It is not an investment in itself, but is merely the term given to a group of investment such as stocks, mutual funds, and other assets.

Unlike a 401(k), which is a program usually offered by a company or employer, an IRA is an individual policy started and controlled solely by the policy holder. This allows you the kind of freedom to invest and start at your own discretion. Also, money from an IRA can be withdrawn at any time, while funds for a 401k can only be withdrawn after retirement age under the penalties of heavy taxation.

There are several different kinds of IRA’s. A traditional IRA’s is a tax deferred retirement account that is only taxed when withdrawals are made after retirement. This means that all of your interest and capitol gains are allowed to compound every year free from taxation, which allows traditional IRA’s to grow  faster than other taxable accounts.

A Roth IRA is similar to a traditional IRA, but the difference comes from the way you pay taxes on your Investment. With a Roth IRA you pay into the account and the initial investment is taxed from the begining. This means that you pay the taxes now rather than later, and the money is allowed to grow tax-free over the life of the investment. When you start withdrawals upon retirement, there is no fee or taxation. Every single dime you invest goes back to you.

There are also SEP IRA’s for small business owners who employ a certain number of employees.  SIMPLE IRA’S is a savings incentive match plan, and is usually used by small businesses and individuals who are self-employed. You can check out the IRS web site for more information on all of the retirement plans to see if you qualify.

If you hope to invest in your future check out some of these excellent retirement plans. Though there are many options for retirement, IRA’s are a great investment and worth your time.