Our portfolio

In the interest of transparency, here’s how my wife and I allocate our assets:

  1. 20% in various trading models (U.S. equities)
  2. 20% in a long term market timing model (U.S. equities)
  3. 20% in a buy and hold strategy (U.S. equities)
  4. 40% in bond ETFs (to be used for other investments outside of U.S. equities when those opportunities arise)

My wife also owns a construction company, which constitutes a significant portion of our net worth. But since this is a private company, its value is hard to calculate. Hence we have excluded this from our “asset allocation” for the sake of simplicity.

20% in trading models

20% of our net worth is used for trading U.S. equities. We do so entirely with 2 quantitative trading models (split 10% each). We don’t use 100% of our net worth for trading because we don’t want to be a one trick pony. In fact, very few multi-millionaires and billionaires do not diversify their net worth and income streams. While concentration is what made many of them wealthy, diversification is what enables them to keep their wealth.

20% in a long term market timing model

“What worked in the past may not work in the future”. I find that this is moreso true for short term market timing than it is for long term market timing. Long term market timing is based on a simple belief:

Buy and hold works most of the time. You should buy and hold during bull markets and try to avoid major bear markets.

I’ve developed numerous long term market timing models at SentimenTrader, and we use one of these for this part of our portfolio. This part of our portfolio only sells equities when the probability of a major bear market is high.

20% in a buy and hold strategy

20% of our net worth is in a buy and hold strategy for U.S. stocks. Right now, this holds VUSA (an S&P 500 ETF) and some Berkshire Hathaway stock. This strategy only sells stocks when the U.S. stock market’s valuation is extremely high relative to that of other assets, which has not happened yet.

Why buy and hold? Isn’t that only for “unsophisticated retail investors”?

It all comes down to the definition of “risk”.

  1. Wall Street conventionally defines “risk” as volatility.
  2. I consider “risk” to be “the probability that your capital will be permanently lost”.

This is a very important distinction. Here’s an example. Let’s assume that Trading Strategy XYZ has a terrific backtest and has worked well for 10 years. On the surface, its “risk” (volatility) is extremely low. Sounds appealing, doesn’t it?

In reality, its “risk” (permanent loss of capital) might be extremely high. What worked in the past may not work in the future. If you trade in and out of the market, the market anomaly/inefficiency that made you successful in the past may stop working out of the blue and blow up your portfolio. Don’t believe me? Just look at the countless hedge funds and traders that used to do well but have performed poorly in recent years. And don’t believe the market gurus who claim to be “trading experts” but don’t show you their own trading returns. There’s a reason why they don’t use their audited trading returns as marketing material.

Put simply, buying and holding U.S. equities is less “risky” than trading in the long run, granted that valuations are not exorbitant. You can trade your portfolio down to $0 (as many do), but it’s extremely hard for the U.S. stock market to go down to $0. A long term (30+ years) bet on U.S. stocks is a long term bet on Corporate America, and unless Corporate America goes to $0, your buy and hold portfolio will not go to $0.

40% in bond ETFs

Right now we have 40% of our portfolio in short term Treasury bond ETFs because:

  1. While U.S. equity valuations are not exorbitant, they are still high. Given where we are in the U.S. economic expansion (late-cycle) and high equity valuations, keeping 40% of our portfolio in cash-like securities gives us the flexibility to buy stocks if an opportunity arises (i.e. stocks crash).
  2. More importantly, we are looking into other investment opportunities besides equities. This keeps with our theme of not being a one trick pony. We’re looking at real estate, private assets, and re-investing into our family’s construction business.

*These Treasury bond ETFs hardly fluctuate in value, which makes them act more like a temporary placeholder for cash.


I hope this provides some transparency into how I’ve allocated my own assets, which I think is necessary since I provide investment/trading research at SentimenTrader. I firmly believe that anyone who provides financial/investment/trading advice should disclaim how they allocate their own assets. After all, would you trust an advice giver who doesn’t eat his own cooking?

7 comments add yours

  1. Hi Troy:
    can you be more specific what you consider trading models and what you consider long term market timing models? In which category do the models with the Buy/Sell signals on Sentiment Trader fall?
    Thank you,

    • Hi JeanPierre,

      I use the Macro Index Model & Simple Trading Model With Fundamentals for long term market timing, and the same 2 models (+ sentiment indicators) for short term market timing.

      • Hi Troy:

        thank you for your response. Would it be possible to add the 2 models (+ sentiment indicators) to the Buy/Sell Signals? It would be interesting to see how you use the sentiment indicators for short term market timing together with the 2 models.


  2. Thanks for sharing your personal investment program with me.
    It would also be helpful to know which specific models that you are personally using.
    Brad Chapman M.D.

    • Hi Brad, I use the Macro Index Model & Simple Trading Model With Fundamentals for long term market timing, and the same 2 models (+ sentiment indicators) for short term market timing.

  3. Dear Troy,
    Please disregard my reply to your email sent earlier today.

    That was before I read your message above.

    I very much wish I’d been reading your work 10 years ago before I lost most of my money trading stocks.

    My lifetime savings.

    Your work is outstanding and intelligent, very wise.

    Thanks very much

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