Diamond

CPM Investing LLC - Research Publications

ETF Model Portfolios for High Return and Low Variability

DIAMOND Publication Overview

Please see note on Success Factors for users of our model portfolios.

Overview

Diamond is for those who are comfortable trading Focused 15 Investing portfolios and are comfortable with the 2x leveraged ETFs "DDM" and "UST." Portfolios 1-5 vary only by their aggressiveness; they hold the same ETFs. They are listed by increasing expected return and variability.

The main portfolio on the publication is indicated on page 2 of the pdf. This is suitable as a long-term portfolio because it has a high return compared to the DJIA and a level of variability that is close to the Vanguard 60% stock / 40% bond mutual fund "VBINX."

If you have a long time horizon, select a portfolio that is more aggressive than this for your long-term portfolio.

Intended Subscribers

The Diamond publication is designed for people who currently know how to trade ETFs or can learn over the course of a few weeks. For information about setting up an account and trading ETFs, please see this LINK. Developing a solid understanding of the Focused 15 Investing investment approach is also important preparation before using the Diamond publication. For information about the investment approach, please see this LINK. Also, feel free to reach out to us with specific questions.

Selecting a Diamond Model Portfolio

When selecting a Diamond model portfolio, select one that has a level of expected variability similar to or lower than your current investments. Use the selected model portfolio to get accustomed to the trading and volatility of the individual ETFs. When you are comfortable trading and want to use a more aggressive portfolio, gradually shift to the more aggressive portfolio.

For Those with Accounts Invested in Mutual Funds

If you are just getting started with Focused 15 Investing, consider the asset allocation of the investments that you used most recently. Asset allocation mix has a large impact on variability in most traditional investment programs. The asset allocation mixes for commonly available alternatives are:

VSCGX has a stock|bond allocation of 40% stocks and 60% bonds.
VBINX has a stock|bond allocation of 60% stocks and 40% bonds.
VASGX has a stock|bond allocation of 80% stocks and 20% bonds.
The Dow Jones Industrial Average (DJIA) is, of course, 100% stocks.

Select a Diamond portfolio that has expected variability close to that of your recent investments. For example, if your prior investments had a similar stock|bond allocation as VBINX, the variability of your prior investments was probably about 12% (annualized weekly standard deviation of returns).

For Those New to Investing

If you are new to investing, start with the least aggressive portfolio on the publication. Trade that portfolio for a several weeks until you are comfortable with the trading patterns and ETFs before switching to a more aggressive portfolio. If you do switch to a more aggressive portfolio, do so during Plant seasons.
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This link describes the Plant-Wait-Harvest seasons, Link: Plant-Wait-Harvest.

ETF Model Portfolios for High Return and Low Variability

DIAMOND Publication Overview

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