Nov 1, 2014 / April 30, 2015 Portfolio

November 2, 2014

VTI closed October still on a ” buy ” signal……713 consecutive days without a trade…..Total Return, including dividends, 70.74%.

But, if you put on this trade January 1, 2014,  the result , (with no trades ) is 8.9%. year to date

I use VTI as my buy / sell the market signal and SPY as my market entrant, ( year to date 9.7%  ) unless the medium and small caps included in VTI really begin to assert themselves in which case VTI will outperform SPY.  Lately the small and medium caps included in VTI  have served as a drag on VTI, but I’m watching for a resumption of small cap momentum.

Bottom line, I’d like to squeeze north of 10% from my market investments even if that involves more work for me.  Analytical plus clerical.

The question is how much more work and,  will it be possible for me to beat the SPY benchmark irrespective of how much work I put in.  SPY has a well documented  reputation for defeating smarty pants professional advisors and analysts.

For doing nothing,  SPY’s  9.7% is a pretty acceptable alternative to less than 1% in savings and money market accounts.

I’ve constructed an alternative portfolio to run against SPY ( starting at $201.16 ) for  the period November 1, 2014 to April 30, 2015 ( sell in May ).

SPY should represent 58% of this portfolio,  except it won’t.  It will be excluded from the portfolio because I don’t like the present price of SPY,  $201.16, and I have decided, at least till year end, that I would rather purchase SPY at a much lower price,  if possible,  and be paid to be patient to do so.  This means  I intend to write promises ( puts ) to purchase SPY on December 20th for prices in the $180 to $ 195 range …IF on the expiry date of the promise ( or before )  SPY is selling below the price(s)  I promised to purchase at.  My reward for making the promise is being paid a premium upfront, just as an insurance company is paid its premium upfront by you before you have an accident. I am the insurance company writing a policy against anything nasty happening to SPY.  I intend for the premium to amount to be  roughly 5% to 7% per annum.  Plus, the extra return I would make by purchasing ( being assigned ) SPY at say $180 instead of  $ 200.  Yes, I would feel much more comfortable owing SPY at $180 instead of $201.16.

Also excluded is the 5% I would normally invest in fixed income  ETFs as a cash reserve. So, the total excluded is 63% of my investible funds.

Therefore, I am starting with a real money portfolio amounting to 37% of my investible funds.

At the end of the story, I will confess how much money ( as a % ) I made or lost  trading SPY and add or subtract that from the results of my 37% portfolio.

Then, I will compare my result to a theoretical investment in SPY at $201.16  starting as of Monday, November 3.

The make up of my 37% alternate portfolio is as follows. ( 37% = 100% )

 

SMART ETFs …..27%

PKW, SYLD, MOAT…equal dollar amounts

 

SECTOR ETFs……13.5%

DXJ, FBT, IYT, XLV, VWO, FEZ…..equal dollar amounts

 

SECTOR ENERGY ETFs…..13.5%

VDE

 

EQUITIES……..23.5%

ITT, TWX, DIS, DFS, VZ, CVS, UNH, GLW, SNE, HCA…….equal dollar amounts

 

MOMENTUM EQUITIES……….9%

TSLA, FB, BIDU, AAPL, NTES, MU, UA, and AOL…equal dollar amounts

 

INCOME ETFs……13.5%

VYM, XLU, VNQ, DTN………equal dollar amounts

 

FIXED INCOME ETFs….. 13.5%  ( plus any money not  invested  or segregated  for SPY options ). On a market sell signal, all positions come here.

IEF,  BND, HYS, SHYG, VGSH, SHY, HYG and JNK …equal dollar amounts.

I’m using Friday’s closing prices to make it a little easier on myself, clerically.

This is what I am doing….I don’t advise you to do the same.  What I do advise is that you research each of the above symbols and then decide for yourself… This is me covering my rear end.

 

Richard Maurice Gore

 

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