For the last few years I have been tracking my asset allocation on a spreadsheet, to ensure that I keep within the rules I set for myself of what to invest in. If I look back to the early days of my investing, I believe I have a tendency to overweight in stocks when the market is doing well, and underweight when the market is low. Most investors do succumb to this emotional tendency – buy high – sell low, and so I think every investor should use an asset allocation strategy to try to drive emotion out of investing.
Note that my sample allocations are spread across a wide variety of asset classes. This tool includes a lot more categories than the average investor would care about, but I thought it was good to include as many categories as possible to at least make investors think about what categories to consider. Note also I included the red and green arrows next to most asset classes. This isn’t too clearly explained in the page – but it ties back to some of my earlier work in asset allocation where I adopted a strategy of over-weighing categories based on momentum. To recap – historically if you overweight / underweight the S&P 500 based on a 10 month moving average, history tells you it will increase your return. So I have expanded this to include overweight / underweight indicators for the other asset classes where history shows a return increase based on momentum. Note that some asset classes show no correlation to this strategy, and for those I did not factor those into the weighting adjustment. As a side note – for those categories I plan to someday look into what factors could also be included to see if a pattern can be determined – but thats on my ‘someday to-do list’ at this point.
The other framework decision I made with this tool was to host this at vfsystems.net. Rather than have these tools on Puget Investor, I plan to have VFSystems be the home for my investing tools, and focus Puget Investor back to a stock portfolio tracking tool. I think vfsystems.net makes for a better jumping off point for my various investment related endeavors, so look for more tools to appear at vfsystems.net.
I encourage anybody with an interest to try out this new tool – it may help you refine your investment strategy, and perhaps give you new ideas about investing alternatives. And please – any ideas for improvement or feedback – please leave a comment below, or send a note to Vertical Financial Systems.