ETF Asset Allocation Applied To The Ivy Portfolio – A Detailed Example


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Since the beginning of the year, I have written a lot about ETF asset allocation and about an easy way to trade your ETF; The Ivy Portfolio. A few of you were mentioning that the ETF asset allocation model of the Ivy Portfolio was too simple; trading according to the 200 days moving average. An argument that keeps coming back is the following:

“How such simple trading technique can work in such complicated market”

In fact, for the past 10 years, we had our shares of market fluctuations;

– Techno crunch

– Enron, Worldcom and other financial frauds

– The Oil price run

– The Housing market boom

– The Lehman Brothers’failure, Ponzi Schemes and other financial frauds

– The credit crunch

– Huge comeback in 2009

– Government debts problems

This may seem to be quite an argument in order to not use a simple ETF asset allocation model such as the Ivy Portfolio. So I have decided to look at one ETF per asset classed I mentioned in my ETF portfolio model and make a graph of the past 10 years to see when I would be trading them and how much I would ended making.

In order to make my ETF selection, I simply take the biggest one in term of market capitalization (and considering history too in order to make sure I have the longest history to look at the trading possibilities)

Today, I’m leaving you with the graph of each ETF and I’ll come back with my full analysis this Wednesday (March 9th 2011).
BOND ETF; SHY (Starting on August 2nd 2002) (total yield: 3.21%)

REITS ETF: IYR (Starting on March 2nd 2001) (total yield: 64.15%)

US Stock Market: SPY (Starting on March 2nd 2001) (total yield: 6.55%)

International Stock Market: EFA (Starting on August 24th 2001) (total yield 46.58%)

Canadian Stock Market: EWC (Starting on March 2nd 2001) (total yield: 185.82%)

Emerging Stock Market: EWZ (Starting on March 2nd 2001) (total yield: 343.4%)

According to my ETF asset allocation model (and according to the fact that some ETF doesn’t start 10 years ago), the complete yield of this portfolio would have been:

15% ETF US Market 6.55% 0.9825%
15% ETF Canadian Market 185.82% 27.8730%
15% ETF International Market 46.58% 6.9870%
15% ETF Emerging Market 343.40% 51.5100%
20% ETF Real Estate (REIT) 64.15% 12.8300%
20% ETF Bonds 3.21% 0.6420%
100% 100.8245%

So a total yield of 100% over the past 10 years. This Wednesday, we will look at how much we would have been making if we would apply the Ivy Portfolio model.

Do you think we will make more or less money?


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