Re-balance Cycle Reminder

Based on our monthly re-balance calendar, the next re-balance time will be on MondayNovember 19, 2012. You can also find the re-balance calendar of 2012 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.

Also please note that we now list the next re-balance date on every portfolio page.

New Features

At the time of writing, we are working to release a new redesigned home page and varous rework of web pages on We will have more on the new design in follow up newsletters. 

How To Follow Asset Allocation Strategies In Your 401K Account

These days, virtually all 401k (or 403b, 457) plans provide easy basket rebalance feature: you choose funds in your account and then designate target allocation percentages for each fund. The system will then rebalance your account according to the target allocations. In the next rebalance time, you repeat the above steps. Some plans even provide automatic re-balance: you specify re-balance frequency such as monthly, quarterly or annually, the system will automatically do this for you in the future. 

Redemption & Round Trip Limitations In a Plan

For some 401k accounts that have no future new money deposited (these accounts are usually owned by ex-employees who have not rolled over their old 401k accounts in former work places), to properly manage the accounts using model portfolios such as those provided by, all you need to do is to take care of the minimum holding periods and then re-balance the accounts periodically based on the re-balance instructions.  With the new flow introduced in MyPlanIQ, once you customize a new portfolio using your own risk profile and re-balance frequency,  funds held in your actual account should not be out of sync with those in the ‘virtual’ model portfolio provided by as long as you follow the re-balance instructions timely. Thus your actual holdings should have the same holding periods as those in the model portfolio. 

We emphasize that all investment plans on have minimum holding period and round trip limitation parameters set for each fund. You can find this information on a plan page: click on Show All Funds & Details and then Show More Fund Parameters & Ratings, look for columns R and RT for minimum redemption period (unit is month) and round trip period (number of times allowed to buy/sell in trailing 12 months). Each model portfolio’s re-balance instructions strictly follow the rules and won’t violate these parameters. 

We use 3 month minimum holding period for each fund (cash and some stable funds excluded) by default. This is mostly sufficient for most funds (in fact, can be overly conservative). It should be pointed out that recently, many fund companies started to loosen minimum holding periods to 1 month or so. If you find your funds still have way too strict minimum holding periods, voice concern to your plan sponsor. After all, the minimum holding period rule was put into place to avoid market timing scandal in early 1990s. The scandal was mostly some large institutional investors doing and that shouldn’t apply to most individual investors in the first place. 

Regular New Money Invested in a 401K Account

However, many 401k accounts have automatic new money deposit each time when salary is paid. If you are just following a Strategic Asset Allocation portfolio, this should not be an issue as the allocations are rarely changed dramatically. But if you are following a Tactical Asset Allocation portfolio, sometimes, your newly added money into funds in the portfolio can be sold next month or so due to dramatic asset rotation, violating minimum holding periods. For some, if the percentages of new money are relatively small, the penalty wouldn’t affect your portfolio performance seriously. But for others, this is unacceptable.

Sometimes, a 401k plan’s minimum holding period restriction does not apply to automatic deposits, that makes this issue go away. If this is not, you have two options:

Ask your plan sponsor to adopt the practice that makes new money investments exempt from the minimum holding period rule.

If the above is not possible, a more practical and useful way is to specify target allocations for new investments based on a strategic asset allocation model portfolio. Many 401k plans provide separate target allocation specification for the new and existing money. By doing so, you are effectively adopting a core satellite portfolio approach: your new money goes to the core strategic portfolio while your old money in the tactical portfolio. You then re-balance your overall account annually on these two portions. 

The following compares the fortune top 7 company plans’ 401k portfolios:

Portfolio Performance Comparison (as of 11/3/2012)

Ticker/Portfolio Name 1 Week
1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe 10Yr AR 10Yr Sharpe
CHEVRON EMPLOYEE SAVINGS INVESTMENT PLAN Strategic Asset Allocation – Equal Weight Moderate 0.5% 7.3% 7.7% 89.1% 7.3% 72.1% 3.3% 22.8% 7.3% 59.5%
CHEVRON EMPLOYEE SAVINGS INVESTMENT PLAN Tactical Asset Allocation Moderate 0.4% 1.6% 2.0% 43.5% 6.2% 77.9% 6.1% 75.7% 8.9% 104.1%
CONOCOPHILLIPS SAVINGS PLAN Strategic Asset Allocation – Equal Weight Moderate 0.5% 7.8% 7.9% 112.0% 8.3% 93.6% 3.3% 27.0% 7.6% 70.8%
CONOCOPHILLIPS SAVINGS PLAN Tactical Asset Allocation Moderate 0.5% 1.6% 2.3% 40.8% 7.9% 87.3% 5.1% 54.9% 8.2% 87.2%
Ford Motor 401K Strategic Asset Allocation – Equal Weight Moderate 0.5% 9.0% 8.1% 101.7% 9.4% 96.1% 3.6% 23.8% 8.5% 67.8%
Ford Motor 401K Tactical Asset Allocation Moderate 0.3% 4.1% 4.1% 80.6% 4.9% 49.8% 5.4% 55.6% 9.8% 104.3%
General Electric 401K Strategic Asset Allocation – Equal Weight Moderate 0.2% 9.0% 8.8% 99.4% 7.4% 70.0% 1.7% 10.7% 6.1% 46.3%
General Electric 401K Tactical Asset Allocation Moderate 0.2% 4.4% 4.3% 95.2% 6.5% 85.8% 5.0% 67.4% 7.9% 96.0%
Hewlett Packard 401K Strategic Asset Allocation – Equal Weight Moderate 0.3% 10.4% 9.8% 123.8% 10.9% 111.1% 3.5% 21.9% 10.1% 80.0%
Hewlett Packard 401K Tactical Asset Allocation Moderate 0.2% 6.1% 7.1% 150.8% 11.8% 125.0% 9.2% 96.9% 13.5% 145.1%
The Bank of America 401(k) Plan Strategic Asset Allocation – Equal Weight Moderate 0.5% 7.9% 8.7% 112.3% 11.3% 114.9% 3.6% 21.9% 7.8% 56.5%
The Bank of America 401(k) Plan Tactical Asset Allocation Moderate 0.5% 5.7% 6.3% 114.8% 11.8% 106.4% 10.1% 98.3% 11.5% 117.5%
Wal-Mart Profit Sharing and 401(k) Plan Strategic Asset Allocation – Equal Weight Moderate 0.1% 8.3% 8.3% 105.4% 9.3% 111.1% 4.3% 38.1% 9.0% 90.7%
Wal-Mart Profit Sharing and 401(k) Plan Tactical Asset Allocation Moderate 0.1% 5.2% 5.2% 120.7% 8.6% 113.0% 6.6% 84.4% 9.6% 114.2%

*: NOT annualized

**YTD: Year to Date

Detailed and up to date link here >>

Market Overview

Hurricane Sandy passed without inflicting unexpected damage (though it is still once 100 year storm). We are now approaching the election day. In fact, after you read this newsletter, voting is under way. U.S. stock markets have some leadership changed: technology stocks losing steam while cyclical stocks such as financials are still hanging there. In terms of major asset class trends, U.S. stocks crawled back to one of the top spots. 

In the meantime, Hussman and a few have insisted that U.S. economy has been in recession. It should be noted that even if the economy is later determined to be in a shallow recession, there is a possibility that it might not affect stock market seriously. For now, we’ll just follow the markets. 

See 360° Market Overview for more asset class trends.

We remain deeply skeptical on this rally. 

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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