Re-balance Cycle Reminder All MyPlanIQ’s newsletters are archived here.
We just had a rebalance today. For regular SAA and TAA portfolios, the next re-balance will be on Monday, February 18, 2014. You can also find the re-balance calendar for 2013 on ‘Dashboard‘ page once you log in.
As a reminder to expert users: advanced portfolios are still re-balanced based on their original re-balance schedules and they are not the same as those used in Strategic and Tactical Asset Allocation (SAA and TAA) portfolios of a plan.
Please note that we now list the next re-balance date on every portfolio page.
2013 Yer End Review of Lazy and Strategic Portfolios
As a tradition, we would like to review lazy and strategic portfolios tracked on MyPlanIQ.com. These portfolios were proposed by famous investors, brokerages or asset managers. Interested readers can see a previous review July 30, 2012: Strategic Asset Allocation & Lazy Portfolios Review.
2013 was a good year for many strategic portfolios as many of them have put more exposure weight on the best performer – the U.S. stocks. However, for those that have more diversified exposure, it is a mediocre year. See our previous newsletter January 6, 2014: Lessons Learned in 2013 for some discussions on this topic.
Lazy Portfolio Performance
We maintain a Lazy Portfolios page for many lazy portfolios. On this page, you can also find the latest SAA and TAA performance comparison links. For an overview and comparison of these lazy portfolio allocations, again, please refer to our previous newsletter July 30, 2012: Strategic Asset Allocation & Lazy Portfolios Review.
Portfolio Performance Comparison (as of 1/13/2014):
| Ticker/Portfolio Name | 2013 | 1Yr AR | 3Yr AR | 5Yr AR | 5Yr Sharpe | 10Yr AR | 10Yr Sharpe |
|---|---|---|---|---|---|---|---|
| P David Swensen Yale Individual Investor Portfolio Annual Rebalancing | 9.0% | 6.8% | 8.6% | 14.1% | 0.93 | 8.0% | 0.46 |
| Fund Advice Ultimate Buy and Hold Lazy Portfolio | 9.2% | 7.2% | 5.6% | 10.9% | 0.84 | 6.7% | 0.45 |
| The Coffee House Lazy Portfolio ETFs | 14.6% | 12.4% | 8.8% | 13.4% | 1.04 | ||
| Harry Browne Permanent Portfolio | -3.8% | -2.7% | 4.5% | 7.7% | 1.1 | 6.9% | 0.81 |
| Wasik Nano | 8.3% | 7.0% | 7.8% | 11.6% | 0.92 | ||
| VBINX (Vanguard Balanced Index Inv) | 17.4% | 15.4% | 10.5% | 13.1% | 1.13 | 6.7% | 0.47 |
More year by year comparison >>
Swensen portfolio’s performance was affected by its exposure in long term Treasury bonds, in addition to other popular assets such as emerging market stocks and REITs. However, the long term bonds was included to be more for insurance purpose (see the plan description David Swensen Six ETF Asset Individual Investor Plan).
The Coffee House Lazy Portfolio ETFs has one of the best performance in 2013 because of its sizable 40% US stock exposure and no emerging market stocks.
All of these portfolios lagged behind VBINX which has 60% US stock allocation.
Brokerage Suggested Portfolios
MyPlanIQ also maintains portfolios suggested by several brokerages. Again, refer to July 30, 2012: Strategic Asset Allocation & Lazy Portfolios Review for their allocations. In addition, we also added Sharebuilder’s balanced portfolio, which has about 50% (40% in BND and 10% in TIP) bonds.
Portfolio Performance Comparison (as of 1/13/2014):
| Ticker/Portfolio Name | 1Yr AR | 3Yr AR | 5Yr AR | 5Yr Sharpe | 10Yr AR | 10Yr Sharpe |
|---|---|---|---|---|---|---|
| Schwab Managed ETF Portfolios Balanced with Growth | 9.3% | |||||
| Fidelity Managed Accounts Growth with Income | 12.3% | 8.3% | 11.8% | 1.08 | 6.6% | 0.49 |
| Amerivest Guided Portfolio Growth | 12.3% | 8.7% | 13.8% | 0.96 | ||
| Sharebuilder 401K Balanced Portfolio | 11.4% | 8.3% | 10.6% | 1.13 | ||
| VBINX (Vanguard Balanced Index Inv) | 15.4% | 10.5% | 13.1% | 1.13 | 6.7% | 0.47 |
These portfolios have more exposure in US stocks and thus they did better than the lazy portfolios mentioned above.
Advisory Firms Suggested Portfolios
Several online based investment advisory suggest strategic portfolios. The following is their performance:
Portfolio Performance Comparison (as of 1/13/2014)
| Ticker/Portfolio Name | 1Yr AR | 3Yr AR | 5Yr AR | 5Yr Sharpe | 10Yr AR | 10Yr Sharpe |
|---|---|---|---|---|---|---|
| AssetBuilder Model Portfolio 09 | 6.6% | 4.3% | 10.7% | 0.83 | ||
| Wealthfront Moderate Portfolio | 6.5% | 5.4% | 10.9% | 0.86 | ||
| Morningstar Ibbotson Balanced ETF Portfolio | 10.5% | 7.2% | 12.6% | 0.99 | ||
| Six Core Asset ETFs Tactical Asset Allocation Moderate | 10.9% | 6.2% | 9.3% | 0.91 | 9.9% | 0.82 |
| Six Core Asset ETFs Strategic Asset Allocation – Optimal Moderate | 6.3% | 5.8% | 11.3% | 0.88 | 5.8% | 0.36 |
| VBINX (Vanguard Balanced Index Inv) | 15.4% | 10.5% | 13.1% | 1.13 | 6.7% | 0.47 |
More year by year comparison >>
In the above, we also include the comparison with MyPlanIQ’s simplest six core asset ETFs based portfolios.
These portfolios have more diversified exposure in their allocations. For example, the commodity and emerging market stock exposures in Wealthfront portfolio and the sizable emerging market stock and global fixed income bonds in Scott Burn’s AssetBuilder portfolio all affected their 2013 performance, same as in our Six Core Asset Strategic Optimal portfolio.
Asset Outlook
Although we are not a fan of making predictions nor we claim to be an expert in this, it is still beneficial to make certain educated guess for asset movements. This guess or prediction has no effect on our short term investment positions but it can have impact on our long term asset allocation decision.
Since 2012, emerging market economies have been under pressure to re-adjust their export (to developed markets) driven economic models. In the meantime, developed countries, notably in the US and Europe, have slowly recovered from their over leveraged and over consumption based economies. The global readjustment appears to be far from over. This readjustment period is a secular large trend that will last at least several years. During this period, we believe developed countries will reap the biggest benefit. We thus again believe that US and some European focused equity exposure and more tactical positions in fixed income (i.e. not overly focused on international and emerging market bonds) will be the best bet in the coming years.
However, who’s to say that we are an expert or possess a crystal ball? In fact, again, who’s to say that anyone has such an ability. Regardless of what our hunches are, we thus again stick to our systematic approaches that employ strategic and tactical asset allocation. In essence, diversification and riding on big trends are two important principles we are sticking to.
Market Overview
An important trend change since the New Year is that total bond index has recovered and now it has a positive trend score. In the meantime, stocks have exhibited further weakness. The following table shows how major indices have done YTD (Year To Date):
| Ticker/Portfolio Name | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR |
|---|---|---|---|---|
| GLD (SPDR Gold Shares) | 4.2% | -25.3% | -3.2% | 7.5% |
| VNQ (Vanguard REIT Index ETF) | 1.7% | 1.9% | 10.2% | 18.0% |
| BND (Vanguard Total Bond Market ETF) | 0.7% | -1.2% | 2.8% | 3.8% |
| VEA (Vanguard MSCI EAFE ETF) | -0.5% | 18.8% | 8.6% | 12.4% |
| VTI (Vanguard Total Stock Market ETF) | -1.3% | 27.3% | 15.3% | 18.2% |
| DBC (PowerShares DB Commodity Index Tracking) | -3.2% | -10.3% | -2.9% | 2.8% |
| VWO (Vanguard MSCI Emerging Markets ETF) | -4.3% | -10.3% | -3.9% | 12.6% |
Noticeably, Gold has been the strongest. However, former high flyers including US and international stocks have had some small correction.
For more detailed asset trend scores, please refer to 360° Market Overview.
We would like to remind our readers that markets are more precarious now than other times in the last 5 years. It is a good time and imperative to adjust to a risk level you are comfortable with right now. However, recognizing our deficiency to predict the markets, we will stay on course.
We again copy our position statements (from previous newsletters):
Our position has not changed: We still maintain our cautious attitude to the recent stock market strength. Again, we have not seen any meaningful or substantial structural change in the U.S., European and emerging market economies. However, we will let markets sort this out and will try to take advantage over its irrational behavior if it is possible.
We again would like to stress for any new investor and new money, the best way to step into this kind of markets is through dollar cost average (DCA), i.e. invest and/or follow a model portfolio in several phases (such as 2 or 3 months) instead of the whole sum at one shot.
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