Gary,
I am no financial wizard but why fix something that isn't broken.
As I said above, it wasn't about fixing the portfolio because it was broken. It was about trying to reflect a portfolio structure that assisted in showing and coaching our customers.
Upon further reflection since my above post and your last post, over its lifespan Iain's Investment Plan has had mixed objectives that have been in conflict with each other to some degree. As stated above.
Rather than have the persevering clarity about its objectives, which are needed to create a long-term portfolio framework that continues to outperform alternative investing avenues and the Total Return index.
That is a lesson in its own right!
Can SWS back test what IIP's portfolio would look like now if it was in its original form??
We certainly can.
And herein lies one of the key decision criteria as to what performance results we "show & tell" with research, and what we "show & tell" with portfolios executed with money in live trading conditions.
To demonstrate historical performance of an ETF timing portfolio via back-testing, is 100% equivalent to historical mechanical live execution. Because there is no ‘stock’ selection in the ETF portfolio. Once the ETFs are chosen before starting the portfolio, the results will be the results.
We could run updated historical performance of this from time to time to show historical ETF portfolio performance without the need to try to construct a single live executed mixed ETF/Stock portfolio.
Whereas a stock portfolio is different. Stock selection, capital size, number of EW positions and when it is started will result in different outcomes, especially in the short term (less than a year).
My portfolio provided a 9.5% annual return for the last financial year and although it was well below the ASX EW portfolio, it performed much better than the Australian Super Funds negative returns (and even Warren Buffet, ha ha). For me, Spa3 Investor is doing its job.
This is great to hear Gary. Thank you for sharing.
Share Wealth Systems core business is to conduct research in the stock market to create mechanical systems that have a probabilistic EDGE, and then package the system in software, a plan/process and coaching that makes it as easy and efficient as possible for ordinary people to execute in the market.
SWS sees historical research results, AND executing live portfolios in the market as a key part in the coaching component.
With the benefit of experience, and knowledge of what can be done with research tools to closely replicate live execution, I’d like to focus live portfolio execution on the areas that require the most coaching.
And focus on where investing results require more live “show & tell” to help our customers improve their belief in mechanical investing to achieve their investing goals & objectives.
To my thinking, these areas are where the most mistakes can be made., i.e. where investors can most deviate from their Investment Plan. And I think this is with executing a stocks portfolio that has multiple simultaneously open positions through all kinds of market conditions.
My view is that replicating a timing ETF portfolio requires no discretion once the ETFs are chosen and the portfolio is underway. There is no ‘stocks selection’ dilemma thereafter. The execution mistakes that can be made are no different to those in an EW Stock portfolio, i.e., not buying or selling when signalled to do so.
In terms of combining the performance of an ETFs and a Stocks portfolio, the overall performance can always be calculated from separate portfolios rather than having to execute them as a single portfolio.
For coaching purposes, for example, SWS could always show the combined performance of a researched ETF portfolio with timing, with that of a live executed stocks portfolio. The ETF portfolio could reside in the Core portion of the Core Satellite framework and the stocks portfolio as a Satellite.
Keen to hear your thoughts, Gary et al.
Regards
Gary