Wednesday, August 1, 2012

Portfolio Foundations

One of the building blocks of a successful investment portfolio is obviously selection of components that are each robust on their own. When pursuing a market neutral strategy like Mosaic that cannot be  accomplished by combined winners and losers, each component must exhibit positive returns although the mix of components have to also exhibit inverse correlation characteristics.  Here's an example ...the ALL IN model...featuring equal weights of 9 stocks & ETFs to build a SPY beating portfolio.  Can these results be improved upon?  No problem.  Is there a risk price to pay?  Yes.  Can the risk be mitigated?  Yes, to some extent.  What could go wrong with this model?  Lots.  We see how in subsequent explorations.