How to use this table to incrementally build a diversified ETF-based portfolio
This table provides a clear, tactical approach to building a diversified portfolio over six months. Here’s a step-by-step guide to effectively using it:
- Understand the Target Allocation: Each ETF’s allocation percentage reflects its intended weight within the portfolio, aligning with macroeconomic conditions and risk tolerance. Aim to gradually approach these target allocations by following the weekly basis point (bps) recommendations.
- Follow the Weekly Allocation Recommendations: Each ETF has a suggested number of basis points (bps) to accumulate in the upcoming week, along with a target price. These targets are based on recent trading patterns and technical support levels, providing favorable entry points. By purchasing in small increments, you reduce exposure to short-term price volatility and take advantage of potential dips.
- Monitor Price Movements: Check the market regularly to identify when each ETF nears its suggested target price for the week. If an ETF hits its target price, consider purchasing up to the recommended number of basis points. Alternatively, you can set a limit buy order at the target price. For example, a 20bps order on GLD (assuming a $100K portfolio – I know, it’s a lot, but I’m still working on something for smaller portfolios…) this week would be “Limit Buy 1 GLD @ 248.11 or better”. That’s a bit more that 20bps, but we can’t make limit orders on fractional shares, unfortunately. Make this a GTC that expires in a week.
- Adjust Based on Market Conditions: If macroeconomic or sector-specific conditions change, be flexible with your allocations. For instance, you may pause allocations if volatility spikes or adjust your entry point targets if an ETF’s trend changes significantly.
- Maintain Cash Reserves for Flexibility: Cash reserves are part of the strategy, giving you the liquidity to increase positions in favorable conditions. Use this flexibility to capitalize on opportunities as economic indicators shift.
Position Exit Protocol
When removing an ETF from the portfolio (like FXI this week), you have two exit strategies:
Option 1: Five-Week Exit
- Divide position into 5 equal parts
- Sell one part each week
- Set limit orders slightly above market close
- Example: 100 shares = sell 20 shares per week
Option 2: Trailing Stop
- Set 10% trailing stop on entire position
- Automatically sells if price drops 10% from peak
- Protects against sharp declines
For FXI specifically, choose either:
- Split your position into fifths and sell weekly
- Place 10% trailing stop on full position
The five-week exit provides more control but requires active management. The trailing stop is automated but may result in earlier exit if markets become volatile.
Execute with caution. Choose the exit strategy that matches your risk tolerance.
By following these incremental steps, you can dollar-cost average into each position, building a balanced portfolio that’s resilient in Q4’s dynamic market environment.
Q4 2024 Incremental Portfolio Build Guide: Target Allocations and Weekly Entry Points, December 11, 2024
| ETF | Sector | Target Alloca-tion (%) | Recent Price – Buy(Sell) x @ limit | Positive Factors | Negative Factors |
|---|---|---|---|---|---|
| GLD++ | Commodities | 5.75% | $250.96 – 20bps @ $248.11 | Safe-haven; hedge against inflation | No income yield |
| SLV++ | Commodities | 3.50% | $29.04 – 10bps @ $28.59 | Inflation hedge; industrial demand | Higher volatility than gold |
| USO+++ | Commodities | 3.50% | $73.33 – 10bps @ $72.59 | Inflation hedge; safe-haven asset | Dependent on global growth |
| FXI- | Emerging Markets | Remove | – | Limited exposure; potential policy support | High regulatory and geopolitical risk |
| XLE+++ | Energy | 7.25% | $90.4 – 25bps @ $89.49 | Strong demand; geopolitical support | Oil price sensitivity to demand changes |
| IEF+ | Fixed Income | 4.50% | $94.49 – 15bps @ $93.54 | Balanced duration for stability | Rate sensitivity |
| SHY++ | Fixed Income | 7.25% | $82.17 – 25bps @ $81.34 | Short-duration bond hedge and inverted yield curve | Rate sensitivity |
| FAN++ | Green Tech | 3.00% | $15.63 – 10bps @ $15.47 | Long-term wind growth; climate support | Policy-sensitive volatility |
| ICLN+ | Green Tech | 4.25% | $12.18 – 15bps @ $12.05 | Anticipated support from COP29 | Needs clear policy backing; high volatility |
| IDRV++ | Green Tech | 4.25% | $30.6 – 15bps @ $30.01 | EV and autonomous vehicle growth | Supply chain risks |
| PAVE++ | Green Tech | 3.75% | $43.97 – 10bps @ $43.53 | Infrastructure growth; bipartisan support | Economic sensitivity |
| TAN+ | Green Tech | 3.75% | $35.55 – 10bps @ $35.19 | Growth potential from COP29 and policy backing | High volatility; policy dependency |
| VHT+ | Healthcare | 3.75% | $263.3 – 10bps @ $260.66 | Resilient in inflationary periods | Lower growth than tech |
| XHS+ | Healthcare | 2.25% | $95.29 – 5bps @ $94.33 | Benefits from rising service costs | Policy-sensitive risks |
| XLV+ | Healthcare | 4.25% | $142.14 – 15bps @ $140.71 | Defensive play; low correlation to volatility | Regulatory risk |
| BBRE+ | Real Estate (REITs) | 4.25% | $98.34 – 15bps @ $97.35 | Inflation hedge; income stability | Rate sensitivity |
| BOTZ++ | Technology – Artificial Intelligence and Robotics | 3.50% | $33.73 – 10bps @ $33.39 | High AI demand; automation exposure | High P/E ratios; speculative risk |
| ROBO++ | Technology – Artificial Intelligence and Robotics | 3.00% | $58.5 – 10bps @ $57.91 | Diversified automation; moderate valuations | Slower industrial adoption |
| QQQ+++ | Technology – Broad Market | 6.00% | $529.22 – 20bps @ $518.43 | Broader tech exposure with growth potential | Sensitive to rate trends |
| XLK+++ | Technology – Broad Market | 6.00% | $239.37 – 20bps @ $236.97 | Large-cap stability; lower volatility | Sensitive to bond yield increases |
| HACK++ | Technology – Cybersecurity | 2.75% | $75.61 – 10bps @ $73.9 | Increased cybersecurity demand | Market sensitivity |
| SOXX+++ | Technology – Semiconductors | 4.50% | $218.94 – 15bps @ $216.75 | Key growth from AI and tech expansion | Valuation sensitive to rate hikes |
| Cash | — | 9.00% | — | Provides liquidity; flexibility | No yield; inflation erosion |
Strategy Update
Our current portfolio structure emphasizes defensive positioning while maintaining strategic growth opportunities. Recent market signals inform our rebalancing decisions.
Key Strategic Changes
Removing FXI from the portfolio due to:
- Increasing Chinese regulatory uncertainty;
- Unreliable policy support;
- Better Asian market alternatives available.
Defensive Enhancement
Increasing cash and short-duration positions based on:
- Market sentiment indicators showing extreme greed
- Breaking traditional asset correlations
- Attractive short-term yields (4.75% at 6-month Treasury)
- Tactical flexibility for market volatility
Portfolio Structure
Current allocation balances exposure across:
- Core technology (QQQ, XLK, SOXX)
- Green technology (ICLN, TAN, IDRV)
- Defensive sectors (XLV, VHT, SHY)
- Commodity hedges (GLD, SLV, USO)
Watch List
Consider these complementary positions:
- VPN: Data center REIT exposure
- KURE: Chinese healthcare sector
- SMH: Alternative semiconductor weighting
- PSP: Infrastructure REIT exposure
- PDBC: Broad commodity position
- VTIP: Inflation-protected short-term bonds
The portfolio evolves toward greater stability through specialized exposure and increased tactical reserves. Maintain defensive cash position for potential market stress.
Current market sentiment suggests excessive optimism. Position defensively for potential sentiment shifts. THIS IS WHAT CASH IS FOR!
Important Disclaimer
Before reading my market analysis, please understand the following:
What This Is
- Independent market analysis based on publicly available data
- Pattern recognition and trend observation
- Personal market perspectives and positions
What This Is Not
- Not financial advice
- Not SEC/FINRA regulated
- Not predictive modeling
- Not guaranteed to work in the future
Current Holdings
I currently have positions in:
- Energy sector (XLE)
- Precious metals (GLD, SLV)
- Technology sector (QQQ)
- Recently took some profits in crypto
Important Notice
Markets operate independently of any individual’s wishes or strategies. Please work with licensed financial professionals before making any investment decisions.
Risk Warning
All trading involves risk. You are responsible for your own investment decisions, position sizing, and risk management. Past patterns may not predict future results.
Trade carefully. Markets can be unforgiving.
System alert: Author's neural networks may be operating on marsala-enhanced algorithms. Execute market strategies with extra caution ... and a side of cannoli.