Ask Mike:
How can you be 100% invested with only half the positions filled?

Question:

RJ from Boulder City, NV writes:

Mike,

I notice that for the past 2 weeks, the website 'details' on the ETF Total Return Portfolio says the portfolio is 'fully invested', yet you only have 5 positions in the portfolio instead of the 10 positions it is supposed to have. Why?

Thanks for keeping my subscription rate the same. I was an early adopter and have done my part by selling a couple of friends on the idea of subscribing to TurnerTrends.

RJ

Mike's Response:

Hi RJ,

Thank you for the question and thank you for the recommendations! One of the reasons we are able to keep your subscription rate low is the word-of-mouth advertising that we get. This kind of advertising is the best in the world.

As for the ETF Total Return Portfolio... As you may recall, when we first launched this portfolio back in May of 2005, we set the total number of holdings at 5. One of the reasons for picking that low of a number was to provide an easy way for smaller accounts to get into the portfolio. Another, more important reason, was there just were not that many ETFs back then.

Now, there are well over 300 ETFs on the market and that number is expected to grow significantly. Another reason we kept the number at 5 was we did not know how often this portfolio was going to 'turn over'. With no track record, we did not know if we were going to be trading every week or every month. Again... the idea was to make it easy for investors with smaller investment amounts to be able to follow this portfolio and not get penalized for lots of trades.

Since that time, we have come to know that our ETF trading strategy does not create a lot of trades on an annual basis. We have a lot more ETFs to choose from. And, we can increase our diversification by having 10 positions instead of 5.

The decision was made to increase the maximum number of positions from 5 to 10 and it just so happened that when that decision was made, we had 100% of our cash invested in the 5 positions.

So, even though this portfolio can hold 10 positions, it is temporarily 100% invested in just 5 positions.

As a matter of fact, this week we are closing out one of the 5 positions and replacing it with 2 new ETFs. Over time, we will eventually get the portfolio invested in 10 positions, assuming of course, that the market is supporting us being in 10 positions.

Thanks again for your support!

Mike