Portfolio Strategy Overview

The first and foremost objective of an investment plan is capital preservation. The process is the same for $2,000 or $2 million: focus on risk management and let discipline, know-how, cost control, and diversification drive superior returns. Don’t put all your eggs in one basket. And never put the baskets in the same cart.

All-Weather, Absolute Return Strategy

I created three ETF (exchange traded funds) investment portfolios for independent investors and two for those enrolled in the U.S. Thrift Savings Plan. Whether you invest in U.S. Dollars, Canadian Dollars or Euros, one or more portfolios may be combined to form an investment plan just right for you. It’s easy and I show you exactly how to do it. Review the track record.

As an independent portfolio strategist, I was free to do the right thing during the 2008 market meltdown. The same disciplined approach also positioned members to reap rewards from the 2009 rebound. I don’t answer to a sales manager or a family of funds. I have no vested interest in commissions and trailing fees. The only thing that matters is how my investment plan works out for you.

1. U.S. Dollar Core Portfolio

This portfolio is ideal for retirement plans or individuals in the wealth-seeding phase (see definition).

Your account must be able to buy and sell four funds or their equivalents:

  1. S&P 500 INDEX: SPY (or IVV) or VFINX or FSMKX or PREIX
  2. MSCI EAFE INDEX: EFA or VDMIX or FIENX or PIEQX
  3. 7-10 YEAR TREASURY BOND: IEF or VFITX or FIBAX or PRTIX
  4. TIPS BOND: TIP or VIPSX or FINPX or PRIPX

This portfolio is reweighted once per month, making it suitable for conservative taxable accounts or retirement accounts where the plan administrator severely limits investment choices and the number of transactions you can make each year.

2. U.S. Dollar Satellite Portfolio

This portfolio is risk-oriented, suitable for trading accounts or those in the wealth-building phase.

Your account must be able to buy and sell six funds or their equivalents:

  1. RUSSELL 2000 INDEX: IWM or VEXMX or FCPGX or PEXMX
  2. MSCI EMERGING MARKETS INDEX: EEM or VEIEX or FEMKX or PRMSX
  3. 20+ YEAR TREASURY BOND: TLT or VBLTX or FLBAX or PRULX
  4. U.S. BASIC MATERIALS SECTOR INDEX: IYM or VAW or FSDPX or PRNEX
  5. U.S. REAL ESTATE INDEX: IYR or VGSIX or FRESX or TRREX
  6. GOLD: GLD or IAU or VGPMX or FSAGX or T. Rowe Price N/A

This portfolio extends the core portfolio and is reweighted once per week. Individuals managing larger sums in flexible retirement accounts or trading accounts may allocate up to 35% to this portfolio to take advantage of additional asset classes and frequent tactical adjustments.

3. Canadian Dollar Core Portfolio

This portfolio is versatile. It is suitable for Canadian retirement plans and individuals in the wealth-seeding phase. It is also used to diversify U.S. Dollar holdings.

Your account must be able to buy and sell five funds or their equivalents:

  1. XSP: iShares CDN S&P 500 Index Fund
  2. XIN: iShares CDN MSCI EAFE Index Fund
  3. XIC: iShares CDN Composite Index Fund
  4. XRB: iShares CDN Real Return Bond Index Fund
  5. XLB: iShares CDN Long Bond Index Fund

This portfolio is reweighted once per month, making it suitable for conservative taxable accounts or retirement accounts. Investors seeking currency diversification should consider allocating a combination of up to 65% Canadian Core Portfolio/35% U.S. Satellite Portfolio.

4. Thrift Savings Plan “Growth” Portfolio

This portfolio is for individuals participating in the Thrift Savings Plan, a retirement savings plan for civilians who are employed by the United States Government and members of the uniformed services.

The growth portfolio uses the F, C, S, and I Funds and is reweighted once per month.

5. Thrift Savings Plan “Income” Portfolio

This portfolio is for individuals participating in the Thrift Savings Plan, a retirement savings plan for civilians who are employed by the United States Government and members of the uniformed services.

The growth portfolio uses the G, F, C, S, and I Funds and is reweighted once per month.

Hedge Your Portfolio

Diversification is the first line of defense in normal market conditions. During time of extreme volatility, it may become necessary to liquidate a portfolio or, for tax purposes, hedge exposure with inverse funds. To learn more about portfolio construction, please visit The Knowledge Base.

Reweighting the Portfolio

The portfolios are reweighted periodically to adapt to ever-changing market conditions. The U.S. Satellite portfolio is reweighted weekly while the Core and TSP portfolios are reweighted monthly to conform to limits imposed by administrators of conservative retirement plans and the U.S. government Thrift Savings Plan.

Results achieved will be closer to published returns if subscribers reweight as directed. Due to the value of the account, tax status, commission and other transaction costs, subscribers may choose to adjust their portfolio only when it has drifted from the suggested weighting by a material amount.