Who is behind this site, and what are our credentials?

 We are a small team of cross-disciplined experts with advanced degrees in finance and computer science from the University of Chicago. As a result, our approach is grounded heavily in the University of Chicago’s philosophy of the efficiency of markets.

We have automated our approach in a proprietary computer program, utilizing leading edge genetic learning and numerical modeling/optimization

What are the key principles underlying our approach?

Our approach is grounded in the following underlying principles:

  • Modern Portfolio Theory (MPT)
  • Actively managed funds underperform their respective benchmarks a majority of the time
  • Total investment return can be maximized by eliminating unnecessary costs
  • Actively managed funds necessitate higher management expenses
  • ETF's are less expensive than mutual funds
  • Investment portfolio volatility and risk can be minimized through effective diversification

Why have we limited our scope to ETF's (actually ETP's) only?

The acronym ETP stands for “Exchange Traded Product". Similar to a mutual fund, an ETP is a basket of underlying investment assets (typically stocks or bonds). ETP’s are created and managed by investment firms such as Vanguard and State Street. Key differences between mutual funds and ETP's:

  • The mechanics of buying and selling ETP’s versus mutual funds are a bit different. To your investment account broker, buying and selling an ETP appears equivalent to buying and selling a stock.
  • The management costs of ETP’s are generally lower than the management costs of mutual funds. Consequently, we believe our approach minimizes total investing costs by utilizing ETP’s versus mutual funds.

Realize ETP's can invest in a broad range of underlying asset types—stocks, bonds, real estate, commodities. ETP’s provide us efficient vehicles for investing in these underlying assets.

What is an "ETP" versus an "ETF"?

ETP is an acronym for "Exchange Traded Product". ETF is an acronym for "Exchange Traded Fund". An ETF is the most common type of ETP. However, there are other type of ETP's, including:

  • ETN (Exchange Traded Note)
  • Commodity Pool
  • Grantor Trust
  • UIT (Unit Investment Trust)

Our scope is actually ETP's versus ETF's. However, we will typically use the term ETF rather than ETP. While less correct, the term is more recognized, thus we believe more understandable by our audience.

How is our approach superior to "active investing"?

Key advantages of our approach:

  • Historical studies have shown actively managed funds underperform versus their respective benchmarks a majority of the time
  • Actively managed funds generate higher management costs

We currently update our report once per year, in January, utilizing actual performance data through December 31 of the preceding year. 

Are ETF management costs/fees included in our analysis?

 Yes. We compute and then utilize the “adjusted net monthly return” for every ETF as key input for our analysis. This “adjusted net monthly return” includes the effects of management costs, of dividends, of splits, etc. 

How diversified is the range of asset classes we include in our analysis?

We believe the span of our ETF library matches anyone in the industry. Our library includes all the leading ETF providers, spans all key geographic regions worldwide, and covers a broad spectrum of asset classes--stocks, bonds, real estate, commodities, etc. We strive to identify as broad a range as possible, as diverse input provides us the "raw material" necessary to find portfolio combinations offering maximum diversification.

Are our portfolios diversified across asset classes and/or geographic regions?

We do not impose explicit constraints regarding diversification across asset classes or regions. However, our pool of candidate securities does span asset classes and geographic regions. As a result, our search algorithm will implicitly utilize such diversification if doing so minimizes portfolio volatility. As a qualitative check ex post facto, we do include asset class and geographic region diversification profiles for each portfolio in our report. 

Do we included "leveraged" ETF's in our analysis?

No, we intentionally exclude “leveraged”, or so-called “exotic”, ETF’s from consideration in our analysis due to their volatility. 

Do we include "risk free" assets in our analysis?

The term “risk free asset” is actually a misnomer—no investment type is completely risk free. Standard convention in the finance industry is to use extremely short term US government bonds as a close substitute for truly risk free assets. We do include multiple ETF’s concentrated in short term US government bonds, including some as short as 1-3 month terms. 

Why do our portfolios seem heavily weighted in US-based assets?

 We suspect this weighting results from a combination of factors. Probable leading factors include:

  1. The universe of ETP's available is heavily concentrated in US-based assets. Simply put, there are more US versus non-US centric securities to choose from.
  2. US financial markets tend to be less volatile than most financial markets outside the US. All other factors being equal, our search algorithm prefers low volatile securities.

How should you choose between the various portfolios in our report?

Our report provides recommended portfolios for a broad range of target returns. Your choice of target return should be based upon personal factors including your tolerance for risk/volatility, your investment timeframe, etc. 

How do we differ from "robo advisor" offerings?

A robo advisor will require you to establish a dedicated account, similar to a brokerage. When you establish your account, the robo advisor will assess your risk tolerance by having you complete a short questionnaire. Based on your responses, the robo advisor will assign the allocation of your account funds across a small set of previously selected ETF's. The robo advisor will periodically re-balance your investments. Finally, the robo advisor will charge you an annual management fee, typically specified as some percentage of your account balance.

By contrast, we do not manage your account. We do not require you to open a new account. We do not charge you an account management fee. We provide analysis and findings only, documented in our report and data.

Last but not least, we do not reduce in advance the set of ETF's within the scope of our analysis, and thus potential portfolio recommendations. Our approach is 100% data based to eliminate subjectivity.

Why should you follow our approach versus hire a financial advisor?

The typical cost of a financial advisor is 1% of assets under management. So, for example, for a portfolio worth $100,000, you could expect to pay a financial advisor approximately $1000 per year. By contrast, our report costs just $80 per year.

Can you use our approach for retirement accounts or non-retirement accounts?

You can use our approach with any investment account (retirement or non-retirement) as long as you have the flexibility to invest in a broad range of ETF’s. 

Do you need to switch brokers to use our approach?

You do not need to change brokerage accounts as long as you have the flexibility to invest in a broad range of ETF’s.

How frequently do we update our report?

We currently update our report once per year, in January, utilizing actual performance data through December 31 of the preceding year. 

How have our portfolio recommendations historically performed?

Average performance over the past six years for each target return is summarized in the following chart.

How frequently should you re-balance your account?

The answer to this question can vary based on size of your portfolio, trading costs your broker charges you for buying and selling, etc. However, based on our quantitative simulations, we think quarterly rebalancing is most appropriate for most investors 

How frequently should you purchase the most current version of our report?

We recommend you purchase the latest report annually.

Do we guarantee the performance of our approach or our specific recommendations?

Absolutely not! Be wary of any investment offering a guaranteed return.