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There’s The Time Value Of Money – And There’s The Value Of Your Time

An underappreciated benefit of low-cost, index-based investing is the modest time involved. That is, in comparison to the time commitment associated with individual stock-picking or some other variant of active investment management. The low-cost, index-based approach gives an investor more time to enjoy other pursuits. Such as time with family and friends, a good book, music, charitable and civic activities, hobbies (what’s a hobby?)… and on occasion a nice glass of wine. Active investment management in contrast goes hand-in-hand with consistent if not constant dedication to general economic news, industry-specific business news, and company-specific news. Attention to all the topics, risks, and developments described in detail in Securities and Exchange Commission filings or other disclosure documents that few investors read in time-consuming detail. Attention that’s paid by oneself or by compensating another to pay that attention. (It’s commonly forgotten that the word “pay” in the phrase “pay attention” is literal. One pays with one’s time, a precious, perishable, and irretrievable item. A costly item.) “Found time” via indexing has value of course. Value that may be hard to quantify, but quantification matters little. Please remember this: the average human life span is less than one million hours. Concern yourself not with Chinese export trends and currency manipulation, Midwest factory capacity utilization, Janet Yellen’s disposition, Vladmir Putin’s territorial ambitions of the month, Apple’s iPhone sales during the most recently concluded quarter, the price of oil, or the like. Or whether that company of which you hold many shares of stock will successfully bid that contract, win that lawsuit, or get that drug approved. Instead, relax. Yes, index-based investing consumes time – just not much. For example, a little time is involved in prudent rebalancing. That’s time well spent. As is time taking advantage of opportunities to reduce one’s investment costs, as cost pressures on investment managers of all stripes continue to lower costs. And with “robo-advisors” and their increasingly sophisticated auto-pilot portfolios sprouting like weeds these days, the time commitment to be a responsible low-cost, index-based investor decreases even more. Unless an investor consumes the greater part of daily economic news for enjoyment or as a hobby – and seems that’s a tall order with today’s information proliferation – what’s not to like about time saved? Especially when coupled with low-cost, index-based investing that can be expected, as empirical studies time and again show, to yield higher risk-adjusted net returns.

Tactical Asset Allocation – February 2016 Update

Here is the tactical asset allocation update for February 2016. As I mentioned last month, I am now using a new data source for the portfolio updates. I am also maintaining the old portfolio formats, in Yahoo Finance, for a while. Here is the link to the Yahoo data. Let’s dive right in. Below are the updates for the AGG3, AGG6, and GTAA13 portfolios. The source data can be found here . The big change here is the use of FINVIZ data and more importantly that these signals are valid after every trading day. So, while I’ll maintain these month end updates, this means that you can implement your portfolio changes on any day of the month, not just month end. FINVIZ will at times generate signals that are slightly different than Yahoo Finance. Click to enlarge AGG3 is now 100% bonds and no cash. This is a significant change from last month where AGG3 was 66% invested. AGG6 is 33.3% cash and 66.6% bonds. AGG6 is more invested than last month’s positions. Below is the YTD performance along with some popular benchmarks. Once change in the performance figures this year is that I am know including the performance of cash when the portfolio sin cash (using SHY as the cash proxy). For the Antonacci dual momentum GEM and GBM portfolios, GEM is now in bonds, BND, and the bond portion of GBM is in cash. I’ve also made my Antonacci tracking sheet shareable so you can see the portfolio details for yourself. Here is the data. Click to enlarge Finally, I am receiving quite a bit of interest in the simple bond quant model I published previously . So, I created a spreadsheet to track one version of the model I presented. The spreadsheet ranks the bond ETFs by 6 month return and uses the absolute 6 month return as a cash filter to be invested or not. Several versions of this model work quite well as discussed in the blog post. Personally, I am now using a 3 month return, 3 month filter, top 3 model but the differences are not that big. That’s it for this month. These portfolios signals are valid for the whole month of February. As always, post any questions you have in the comments. **Note: an observation for this week. Ever notice the percentage of self-called ‘long term investors’ who know what the stock market did on a daily basis? Let me tell you that is long term detrimental to your portfolio performance. It is hard to ignore market data in today’s world. I try very hard to ignore it and have to take active action to avoid finding out about daily gyrations in the market. It’s one of the reasons I do not blog more often. My goal is to only check one per month, that’s it. And even that is too often. If I could auto trade my quant systems I would… I once heard it said that most investors would achieve higher returns if they lost their password to their investment accounts for years. There is a lot of truth in that statement….