Friday, February 03, 2006

Early Riser Asset Allocation

I’ve been talking a great deal about the value of index investing even though most of my portfolio is individual stocks. Well, I’m starting to put my money where my mouth is. I took the advice of Index Investor (with a bit of tweaking) and decided on an Early Riser asset allocation. Here it is:

  • 50% Domestic Equity - individual stocks and ETFs
  • 10% Emerging Foreign Equity - WVO & EVM
  • 10% Commodities - CanRoys and PSPFX
  • 7.5% International Real Estate - FIREX
  • 5% Domestic Real Estate - AIGYX
  • 5% Timber - PCL / RYN
  • 5% Developed Foreign Equity - individual stocks and ETFs
  • 5% Equity Market Neutral (hedged) - HSFGX
  • 2.5% Tax Free Domestic Bonds - E*Trade muni money market & PML

This portfolio is designed to achieve a 7% Real Return (i.e. 7% above US inflation) with the lowest possible annual return standard deviation. This not not exactly the recommended portfolio but I don't want to liquidate all of my holdings due to the potential tax liability on my current winners. Additionally, I will continue to buy some individual stocks (they'll be part of the Domestic Equity allocation) - not because it makes financial sense (passive investing is the way to go), but because I enjoy it.

I'm about 60% complete with the allocation and I'll continue to get my portfolio allocated as close as possible to the policy targets above by investing my new savings into the under allocated asset classes. I'll try to keep you up to date on my performance and progress.

Update: After 20 or so trades, I'm pretty much allocated.

1 Comments:

At 7:49 AM, Anonymous usainbolt said...

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