The Optimal Portfolio

Hindsight is 20/20, yet that's all we have to measure.

 

Show notes are interesting also, including the "Thirty Maidens of Geneva"

Andrew Lo: Finding the Perfect Portfolio--a 'Never-Ending Journey'

 

You might recognise him from the classic book/blog "A Simple Path to Wealth". For some reason he's getting some attention now, makes me chuckle though as I can only wonder if he did have a coffee with JL.

Stocks - Part 1: There's a major market crash coming!!!! and Dr. Lo can't save you. - JLCollinsnh

 

Great article

 

Greatest thing about the JL blogs are the comments. I love reading all the market is so overvalued comments from 2014…. What I would do to jump in my DeLorean and overpay for stocks in ‘14!

 

Define Optimal Portfolio. Is it the one performing best at a moment in time, best over a finite period of time (1 week, month, year, decade, etc) or something else? They might be all the same portfolio.

If it is the instantaneous moment in time performanceyou seek, and you want to maintain this optimum, then you have to keep changing. Similar logic for any time period. But there is no certainty that Optimal Portfolio for the week was in fact optimal.

My definition of Optimal Portfolio is the one that is theoretically optimal as time approaches infinity. In about 5 billion years our sun will die, and well before then, so will the ASX and all world markets, so a finite time frame exists, but infinite is a good enough approximation.

For me, applying odern Portfolio Theory is optimum. Most times I have tweaked the portfolio have resulted in suboptimal performance I do not have the time or knowledge to actively manage or choose actively managed investments. The longer I go, the more hands off I become.

The mathematician who owns MONA has admitted he was lucky. If history repeated itself he'd end up with nothing. Do we want to risk having nothing, or stay within manageable tolerance?

 

The one which suits me no matter what others may think.

 

I would of though your optimal portfolio would be COFF etf

 

Here’s mine. Thoughts?

 

Seems potentially expensive.

Putting effort into stock picking for 10% of your portfolio, is this going to have any meaningful impact on outcomes.

What's the difference between a managed fund and managed portfolio?

That's what 10 seconds of thought came up with with discussion or thinking about.

 

Doesn't really give much info regarding holdings within either (there's.1% missing also )

I'm with @Hodor - what's the fee's/costs

 

Doesn’t tell us anything. May as well be labeled “things” and “other things”.

 

True but then is there actually the Holy Grail of an Optimal Portfolio?

Always seems to change depending on viewpoints and situations - plus whether I have had a sufficient intake of caffeine.

 

Right, there is no such thing. There may be many optimal portfolios depending on absolute risk appetite, vol acceptance, timeline and goals / expectations.

What they were is only clear ex-post.

It is possible however to have a kinda rough stab at an “ok” portfolio for a given situation based on available Information. Of course there is no warranty. Historical returns are a safety blanket.

 

How do you control the amount of cash and amount of ASX if you have exposure in two different managed funds ? or are you deliberately choosing funds with out ASX exposure. I dont think that is a good idea to only have 10% ASX if you are based in Australia especially if high yield is desired which is important at times like this. Returns from the likes of HVN, SIQ, SUL, ADH giving over 10% grossed up yield that I believe you can only get on the ASX, can give you the opportuntity to leverage bargain basement prices. ASX can also give you international exposure. Each allocation will upset the balance in the other allocations and upset the weightings you are trying to achieve unless you are constantly moving funds.

 

I didn't see Beer mentioned so can't be optimal.

 

@Nodrog's beer portfolio. Holdings change on a very regular basis and in view of that may be considered by some as sub-optimal.

 

VAS 5%
AFI 5%
WHF 5%
ARG 5%
SOL 5%
AUI 5%
VGS 30%
IVV 20%
VISM 5%
IEM 5%
Individual stocks 10%

 

The best portfolio is "buy the dip".

Market crashes are to be expected what better reason to buy the dips.
The market always recovers another reason to patiently wait for the dips.
The market always goes up what great line for noobs to nod.
The market is the single best performing investment class over time. another reason to by the dips.
The next 10, 20, 30, 40 years will have just as many collapses, recessions and disasters as in the past. And thats why buying the dips will outperform.
ignore the noise, stay the course and ride out the storm.Patiently wait the dip.
There’s a major market crash coming!! Huh? Doesn't "the market always go up"? A bigger dip is better though.
Of course you call it something that makes you seem like an expert like "Value investing" or even "Deep value investing". Or "Buffeting".