Welcome to the first installment of the new Pro-Folio format! As I mentioned in my last post, starting with this issue I’m publishing Pro-Folio Original (80% US investments) on this blog every month for all to see.

For those of you are are not familiar with Pro-Folio, the investment model is a mathematical model proven by Mebane Faber in a research study after the meltdown of 2008. The model greatly reduces risk and improves investment returns when compared to a portfolio holding the same investments but never selling them (“buy and hold” approach). On a monthly basis, the model provides clear, proven signals on when to get out of the market and when to get back in.

Over 35 years, the model has had a negative return only 1 year – 2008 – when it lost less than 1%. Do you remember what your portfolio did in 2008? Most self-directed investors lost 10, 20, 30, even 40%. Do you wish you had only lost 1%?

Over the same 35 years, the model outperformed its equivalent buy-and-hold approach by an average of 1.5% every year. Average investment return over the period was above 11% per year. This isn’t riding a rocket – but then rockets sometimes explode.

 Pro-Folio is for investors who want to target the highest level of return that is compatible with very low risk of loss (based on past performance).

Why am I publishing this model for free? Because this information is too good and useful not to share. Do you want to manage your investments just once a month? Do you want to sleep well knowing that you are using an investment model that only lost 1% in the worst market since 1929? Do you want to have the confidence to know *exactly* when to get in and out of the market and what investments to buy and sell? Pro-Folio makes it easy to manage your investments quickly and confidently once a month, with just 5 investments. All for free.

For more information about Pro-Folio Original, click here.

And, frankly, I hope that some of you worry about the U.S. fiscal and monetary policy – I hope that some of you worry about the rising influence of China and other nations outside the U.S. – I hope that some of you like the Pro-Folio approach but you fear that the 80% U.S.-based portfolio is at risk if inflation occurs in the U.S. or the Dollar declines in value. For those readers, I hope that some of you will choose to buy a subscription to the Pro-Folio PLUS model to protect your portfolio against U.S. Dollar risks.

This month’s Pro-Folio trade instructions

We are replacing 2 securities this month. In your Pro-Folio portfolio, you should sell the security being replaced, and buy the replacing security instead.

  • IYR replaces IFNA because IFNA volume has been too low – even a few investors trading on my instructions could potentially move the market on a given day. IYR holds similar investments but has a high enough daily trading volume that a few investors trading at once won’t move the price.
  • DJP replaces GSC for the same reason – both hold investments designed to replicate a broad commodity index, but DJP has performed significantly better than GSC and GSC’s volume has been very low. GSC market price could be affected by a handful of investors trading on the same day.

SPY – HOLD OR BUY – price 118.49  —– threshold  112.53
EFA – HOLD OR BUY – price  57.01  —–  threshold  53.15
IYR – HOLD OR BUY – price  54.96  —–  threshold  50.02
DJP – HOLD OR BUY – price 44.13 —– threshold  40.21
IEF – HOLD OR BUY – price 98.77 —– threshold  93.54

For existing investors:
There are no trades other than the replacement trades. You should remain fully invested in the Pro-Folio model.

For new investors:
If you are new to Pro-Folio this month, you should divide your portfolio into 5 equal parts, and invest an equal amount of money in each of the 5 securities shown above. Because you didn’t invest in the components of the model at the time when the buy signals first turned positive, your returns on these initial trades may not be reflective of model’s typical expected returns.

Signing Off
Thanks to each of you for your loyalty and your interest!

In future blog posts I’ll be updating the overall performance of the strategy for 2009 and 2010 to date, so you can see how we’ve been doing since Mebane Faber’s study sample ended on the last day of 2008. It’s good news!

If you want to get the PDF booklet showing you how to implement the Pro-Folio Original trading model on your own, click here.

If you want to learn more about the Pro-Folio PLUS upgrade model, click here.

Your “Equal-Access-for-All” Publisher-

Matt Willson
Grin Press Inc

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