Creating my Retirement Portfolio – 2

I am working on restructuring my portfolio to better achieve my goals. Essentially we want no losing years and an average return of 12% (my wife’s order). This blog is my second installment of my outline and thoughts as to how I expect to get there.

To start with I want a safe distribution. I don’t want a loss year and I don’t want steep drawdowns. So this portfolio is probably more suited for people who are 45 years old or older. If you wanted to tweak it for a younger age, I would shift the ratio to 70% stock funds and 30% alternatives or anti-stock funds as I will call it.

I am thinking of 45% in stock funds, 45% in anti-stock funds and 10% in cash or hedge money. Stock funds are mostly going to be 401K type retirement funds. I manage that by looking at it 1/month, usually between the 1^st and 10^th day of the month on a weekend. My preference is to put my money into about 4-5 funds that are providing the highest returns over a 3 – 6 month period of time. Slow and steady but put my money on the fastest moving funds. Bond funds in the 401K would be one category of anti-stock funds. It is entirely possible that one could be 100% in cash or bond funds using this system in a bear market, as was my case in 2008. That would be part of the tactical asset allocation or market timing component for the stock funds in my 401K. I am not suggesting keeping one’s money in stock funds all the time and re-balancing the portfolio 1/year. I find that method causes me too high a loss in a bear market and would not serve to meet my goals of “No loss years”. Instead I am using tactical asset allocation based on momentum to distribute my money in the fund choices I have in my 401K.

What about stocks? The ones I am looking at are ANR, PBR, HOG, AAPL, CAT, PCP, F, AMD, and SNDK.  Out of all these CAT is the unusual one for me as I tend to shy away from any stock in the Dow Jones 30. I prefer high volume stocks that are a little off the beaten path. AAPL is also not exactly off the beaten path! My trading systems seem to work better on these. Next I would run my dynamic hedge method. Others can use a slow 20 and 50 exponential moving average crossover to determine entry or exit in the stock. That would mean when the 20 day exp moving average crosses above the 50 day exp moving average go long in the stock. In effect this system is saying go long when there is short term buying momentum. The reverse is true for exiting the stock. In the “Ivy portfolio” the authors suggested an 8 month moving average as signal. I interpret that to mean that when you look at a monthly chart of the stock or fund, when the closing stock price is above the 8 exp moving average you would go long. This is a slow moving system. I would suggest some back testing before adopting any of these. I use other systems myself but I think following a disciplined method to manage the portfolio and keeping me weighted across the markets is more important than fine tuning the technical system.

Next time I will write more about anti-stocks and which ones I am thinking of using…