A recent thread referenced Berkshire, an an investment, having no close substitute and what one would do in the absence of Berkshire as an appropriate investment vehicle.
Many have discussed indexing. But how?
Endowment models such as Yale (70% equities, 30% fixed income), Nevada (75% equities, 25% fixed income), Buffett (90% S&P, 10% T-bills), Dalio, etc. have become popularized.
How would you implement any of these portfolios that require automatic rebalancing? For example, global equity target of 45% and rebalance when it hits 35 or 55%?
One large bank I know runs an equal weight S&P 1500 strategy. I am unsure if they use a third party or internally created software.
In the absence of any good money managers and seemingly increasing business disruption, considerations such as the above may be growing in importance.
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Endowment models such as Yale (70% equities, 30% fixed income), Nevada (75% equities, 25% fixed income), Buffett (90% S&P, 10% T-bills), Dalio, etc. have become popularized.
How would you implement any of these portfolios that require automatic rebalancing? For example, global equity target of 45% and rebalance when it hits 35 or 55%?
One large bank I know runs an equal weight S&P 1500 strategy. I am unsure if they use a third party or internally created software.
For something like rebalancing a portfolio, whether a bunch of stocks to equal proportions or other proportions, a lot of brokers offer a button that does it all automatically.
Push a button.
I use Interactive Brokers–I believe they have it.
https://www.interactivebrokers.com/en/?f=%2Fen%2Fsoftware%2F…
For fancier things, in effect you just make a list of the stocks you want in a spreadsheet, with the target proportions, and upload it.
It creates the orders for you.
The commissions for most people add up to less than their coffee budgets.
It’s easy to do; The hard part is deciding what to do.
Random input to the decision hopper:
Since RSP started in May 2003 (S&P 500 equal weight), test length 19.2 years
Total return of SPY: 8.25%/year (it has done unusually well lately relative to equal weight)
Total return of RSP: 9.01%/year
Total return of an equally weighted portfolio of all 1700 Value Line stocks 9.99%/year
Total return of an equally weighted portfolio of the largest 1000 market cap Value Line stocks 9.15%/year
Total return of an equally weighted portfolio of the 500 Value Line stocks with highest 5-year sales growth 10.76%/year
Total return of an equally weighted portfolio of the 50 Value Line stocks with highest 5-year sales growth 12.01%/year
I assumed that the VL portfolios would be rebalanced each 3 months and allowed commissions, 0.4% round trip per trade.
They hand pick their smallest stocks and I think there is a slightly non random and successful bias towards up-and-comers.
All figures include reinvested dividends, no allowance for inflation or tax.
Nothing about the figures above should be construed to be advice to pick the one with the apparently highest return.
Jim
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