Developed in 2001 by Richard Greene and Jennifer Wolfsberg, the Intelligent Index Portfolio is a dynamic asset allocation program that utilizes highly liquid Exchange-Traded Fund (ETF) shares of the S&P 1500. Intelligent Index provides broad representation among all major capitalizations while applying rules-based discipline for portfolio weighting between growth and value styles.
- In an effort to capture excess returns derived from the outperformance of the growth and value style, we began examining returns of six Wilshire style and capitalization classified indices dating back to 1978.
- In conjunction, we tracked the returns for our Model Portfolio of six S&P/Barra style and capitalization classified indices, starting with data from 1994.
- For both datasets, we evaluated quarterly returns from each style and capitalization in comparison with the broad market, while searching for predictable market trends that might be exploited to boost returns.
- In our analysis, we discovered recurring periods during which either the growth or value style would outperform its counterpart.
- These periods generally exhibited two trends:
- “All Down” trend: Negative quarterly returns for the S&P 500 and all six Wilshire and Barra indices evidenced broad market weakness and indiscriminate selling. The weak quarter was typically followed by robust equity returns where performance was led by growth.
- “Selective Market” trend: When returns for the S&P 500
were negative for the quarter, but one or more of the six Wilshire and Barra indices had positive returns, the market had typically become defensive and selective. In uncertain and selective markets, company valuations increased in relative importance to investors, and value generally outperformed growth.
The Intelligent Index Model Portfolio
Guided by these compelling long-term market indicators, we constructed the Intelligent Index Model Portfolio – a strong investment vehicle ensuring broad equity exposure across investment styles and asset classes, and achieving enhanced returns through a process of disciplined dynamic asset allocation.
- The Intelligent Index avoids some of the potential pitfalls associated with actively managed mutual funds by investing in proxies of the benchmark indices.
- Indexing provides diversified exposure to a market or sector.
- Index tracking has been proven to outperform the majority
of actively managed funds for most asset classes and styles.
- Index strategies are cost-effective and tax-efficient.
- The Intelligent Index asset allocation process is applied
consistently to give investors exposure to both growth and value style in small, medium and large capitalization companies. The process is implemented irrespective of market environments and investor psychology in a cost effective manner.
The Intelligent Index Strategy / A Disciplined Investment Strategy
- Dynamic asset allocation – two asset allocation rules.
- Equal exposure across capitalization and investment styles.
- Reasonable amount of risk – portfolio’s three year beta: 1.01.
- Cost-efficient and tax-effective way to participate in broad equity market returns using a strong asset allocation discipline.
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Jennifer Wolfsberg, Richard Greene, Boston Wealth Management, Newton Wealth Management, ETF, Female Principals, Tactical ETF Strategy, Index Strategies, Managed Indexes, Independent female wealth advisors, Indexing
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