Become Your Own Portfolio Manager

There may be a good reason for people who want to be their own portfolio managers. Here is an article that may guide you to the right step.

"Ron DeLegge, Editor (Nov 25, 2009)

SAN DIEGO (ETFguide.com) - Everyday more and more people are making a choice they never thought they would make: To become the manager of their own investments.

Among the top reasons for self-directing one's investments are greater control and flexibility. But there's one other very good reason for becoming your own portfolio manager: The potential for better performance.

Many academic studies show that during both good and bad times the vast majority of Wall Street's portfolio managers consistently underperform versus corresponding benchmark indexes. However, making the decision to supervise your own investments won't necessarily guarantee better results. To avoid the same type of market underperformance that characterizes most of Wall Street, you'll need to build your investments on the right foundation. Click here for more details."

Using moving average to set stop

You may already have some decent paper profits on your portfolio and are wondering when you should take some profits before the recent mini bull turns around. This is where we can use the "Stop".

Most traders and market timers use percentage of the stock price anywhere from 5% to 15% to set their mental or hard stops. Here is another way of setting stops using moving averages.

With existing long position (short uses reverse method)

1. Sell half (1/2) when weekly MA-4 crosses below MA-18 (MA = Moving average)
2. Sell remaining 1/2 when MA-4 crosses below MA-39

If the price bounced back above the MA-18 line, I would buy back 1/2 of the long position when:

1. Weekly MA-4 is greater than 20% of MA-18 after MA-4 crossed above MA-18.

By buying back 1/2 of the position, one can continue to maximize the profits of the trending market despite a temporarily setback.

                                (click the chart to enlarge)

EWZ back testing using TradeStation

Here is another back testing using TradeStation
Symbol: EWZ
Weekly chart from: Jan 1, 2003 to Nov 25, 2009
Buy (all in): MA-4 crosses above MA-39 (white line crosses above cyan line)
Sell (all out): MA-4 crosses below MA-39 (white line crosses below cyan line)

Results:
Total of 5 buys, 4 sells with 3 wins, 1 loss and 1 unrealized profit
(Note: Simulation result is not a guarantee of future results)

                                  (click the chart to enlarge)

EFA back testing using TradeStation

Here is the simple computer simulation back testing using TradeStation platform.
Symbol: EFA
Weekly chart period  from: Jan1, 2003 to Nov 25, 2009
Buy (all in): MA-4 crosses above MA-39 (white line crosses above cyan line)
Sell (all out): MA-4 crosses below MA-39 (white line crosses below cyan line)

Results:
Total of 4 buys, and 3 Sells
2 wins, 1 loss and 1 unrealized profit
(Note: Simulation result is not a guarantee of future results)

(click the chart to enlarge) 

EFA - International Index Fund

EFA is one of the most popular ETF funds that provides global diversification among the index funds. It includes stocks from Europe, Australasia and the Far East. Based on Yahoo Finance next year's estimated EPS, the top 15 holdings' average forward P/E is 12.8 with biggest sector in Financial. In my opinion it is attractive at this level.

With market cap of $35,000M, average daily volume of 18M shares and dividend of 3.42%, the fund is well liquidated and ideal for short term trading and long term holding as growth and dividend play.

As for technical analysis using the moving average cross-over on the weekly chart, the MA-4 is over the MA-39 and there were many occurrences with weekly closing high since 5/22 when the cross-over began.

It seems that the fund still has more room on the up side. The next resistant level may be around $65 from last Friday close of $55.34. EFA may be the fund that can be categorized as a "must own" in my opinion for immediate-term and long-term play if you like to own some international index fund in your investment portfolio.

Harvard Endowment favors mix of International ETFs

International and Emerging Market ETFs are my favors ETFs in my investment portfolio. In my opinion, these markets will outperform the U.S. domestic markets in the years to come. These markets are already attracted by active institutions, investors and traders as it can be verified by its average daily trading volume.

Here is an interesting finding:

According to Yahoo's source (click here) from Tickerspy.com on Nov 19, 2009:

Though the market downturn was devastating for the Harvard endowment, 2009's extend rally has kept the more dire forecasts from being realized.

According to Bloomberg, the value of Harvard's investments fell by -27.3% in the year ended June 30, not as bad as the -30% decline that had been predicted and not as bad as the hits that other institutional investors took.
Though the endowment has substantial investments in alternative assets like real estate and private equity, investors can get a sense of Harvard's strategy by looking at its U.S.-listed, equity holdings. They turn out to be quite diversified, with an international bias that makes ample use of a variety of ETFs.
Looking at Harvard's top U.S.-listed holdings at the end of Q3, which were recently disclosed to the SEC, the largest U.S.-listed, equity holding by a wide margin was ETF iShares MSCI Emerging Markets Index (NYSE: EEM - News), where Harvard was adding its stake during the quarter.
Meanwhile, Harvard was upping its exposure to individual emerging and overseas markets via increased stakes in a variety of ETFs, including iShares FTSE/Xinhua China 25 Index (NYSE: FXI - News), iShares MSCI Brazil Index (NYSE: EWZ - News), iPath MSCI India Index ETN (NYSE: INP - News), iShares MSCI Taiwan Index (NYSE: EWT - News), iShares MSCI Malaysia Index (NYSE: EWM - News), and iShares MSCI South Africa Index (NYSE: EZA - News).

SPY weekly chart of Nov 20, 2009

The S&P 500 ETF SPY weekly closing price continues to hover above the MA-18 and well above the MA-39 line. As the "V" shape is formed starting from near the end of 2007 to bottoming in mid March of 2008 and now steadily coming back to the current level. For trend following using the indicator, the general market seems to have momentum to move up to around $120 in about a month or two from Friday close of $109.43.