March 19, 2012: Should You Be Religious On Your Investment Strategies?

03/20/2012 0 comments

Re-balance Cycle Reminder

We just had a re-balance for March today. Based on our new monthly re-balance calendar, the next re-balance time will be on Monday, April 23, 2012. You can also find the re-balance calendar of 2012 on 'My Portfolios' page.

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.

Religious On An Investment Strategy?

We were stunned that recently, after we sent an invite to a strategic asset allocation firm for them to publish articles on our site so that our readers can learn more about their methodology (besides giving them exposures to more audience), they came back with a reply that stated they 'would rather not have our research on a site that promotes Tactical investing'. Are we promoting tactical investing?

The answer is Yes. But we are not just promoting tactical investing. We strive to be open and objective: in fact, starting from day one, our goal has been to create an open and data-driven platform so that long term retirement-oriented investors (ourselves included) can study, compare and follow asset allocation strategies objectively and quantitatively. We are not biased to any strategy, whether tactical or strategic. We view ourselves to be a fiduciary to our users, readers and ourselves. Our goal is to educate and put ourseleves in an investment process that is sound and safe for our retirement investments.

This brings up another important question: should one be religious on a particular investment strategy? As what we stated previously several times, a strategy is NOT a strategy if one changes it frequently. This is due to the 'random' or 'statistical' nature in investing: for a strategy to deliver its average outcome expected, it has to go through a long time period to have enough data sample. Anything short term would be subject to 'random' fluctuation.

But on ther other hand, to be scientific, no strategies should be viewed 'golden'. One has to find what's best fit for his/her personal situation as well as for the coming years. The latter part is something that seems to be conflict with the previous 'long term' view. Properly judging how a strategy will perform in a future full market cycle (a full bear-bull market, for example) is one important value added by a financial advisor or an investment manager, in our opinion.

What we need is an objective and scientific approach to investing, not a dogmatic or religious view on any strategy.

Portfolio Reviews

The following shows how the five strategic asset allocation portfolios in our featured ETF plans have performed:

 

Portfolio Performance Comparison (as of 3/16/2012)

Portfolio/Fund NameYTD
Return
1Yr AR1Yr Sharpe3Yr AR3Yr Sharpe5Yr AR5Yr Sharpe
Permanent Global Portfolio ETF Plan Strategic Asset Allocation Moderate 6% 3% 19% 18% 118% 6% 31%
MyPlanIQ Diversified Core Allocation ETF Plan Strategic Asset Allocation Moderate 6% 5% 42% 18% 140% 5% 31%
Retirement Income ETFs Strategic Asset Allocation Moderate 5% 5% 37% 19% 125% 3% 12%
Vanguard ETFs Strategic Asset Allocation Moderate 6% 4% 27% 18% 110% 5% 22%
Six Core Asset ETFs Strategic Asset Allocation Moderate 7% 6% 40% 19% 124% 5% 27%


More detailed comparison>>

As a reminder, the comparison link is also listed on our ETF,Mutual Fund Portfolios page.

Market Reviews

Last week continued the risk on trend that has been established.  The only noticeable exception is that high yield bonds are not participating in the current rally as strong as one would hope to see. In fact, it had a negative return week. Long term treasury has taken a beating, along with gold which has been weak recently. It is worth pointing out that it is unlikely that long term rates will go up substantially at the moment since this would derail the fragile recovery. On the other hand, gold will not fare worse if indeed inflation picks up. In a word, markets are probably based on a goldilock economic recovery at the moment. This is probably a transient state that will be resolved soon.

See major asset trend table on 360° Market Overview for more details.

We emphasize the high risk in stock markets again here. For new investors, we repeat that it is important to adopt gradual exposure to risk assets using strategies suh as dollar cost averaging.

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Disclaimer:
Any investment in securities including mutual funds, ETFs, closed end funds, stocks and any other securities could lose money over any period of time. All investments involve risk. Losses may exceed the principal invested. Past performance is not an indicator of future performance. There is no guarantee for future results in your investment and any other actions based on the information provided on the website including, but not limited to, strategies, portfolios, articles, performance data and results of any tools. All rights are reserved and enforced. By accessing the website, you agree not to copy and redistribute the information provided herein without the explicit consent from MyPlanIQ.


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