Re-balance Cycle Reminder

We had our monthly re-balance today. The next re-balance time will be on next MondayJanuary 28, 2013. You can also find the re-balance calendar of 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.

New Feature: New Forum Format, Benchmark Performance & Buy/Sell Price In Transactions

We are in the midst of revamping our discussion forum. For now, please visit our Support tab that consists of two pages: Help and Discussion Forums. We again urge our users to participate into discussions that can be only more helpful and objective to users like you. 

We added benchmark performance in our weekly portfolio performance emails, upon several users’ requests. For now, we report weekly Vanguard 500 (VFINX, tracking S&P 500) and Vanguard Balanced Index (VBINX, tracking a standard 60% stocks/40% bonds portfolio). 

We also added a new historical transaction report in excel format. The format conforms with Morningstar’s portfolio transaction history format. You can find this file in ‘Advanced Oprtions -> All Transactions (Excel format)‘ at the bottom of a portfolio page. 

Year End Review: Advanced Portfolios

In this newsletter, we review 2012 performance of several advanced portfolios listed on the page ‘Advanced->Advanced Strategies‘. 

Tactical Asset Allocation Benchmark Portfolios

There are two portfolios we consider as our tactical asset allocation benchmark portfolios. Both of them use a strategy that is similar to the Tactical Asset Allocation that is used for many ETF, mutual funds and 401k plans. For comparison purpose, we also list the P Goldman Sachs Global Tactical Include Emerging Market Diversified Bonds that uses mostly index mutual funds. 

All of these portfolios should be compared with those tactical portfolios with risk profile 0: meaning these portfolios can be invested 100% in risk assets (stocks, commodities and REITs) in certain periods of time. 

Strategy Name Portfolio 2012  Return 1 year’s AR 3 year’s AR 5 year’s AR
Goldman Sachs Global Tactical Asset Allocation P Relative Strength Trend Following Six Assets 11.0 13.2 9.2 6.5
Goldman Sachs Global Tactical Asset Allocation P Goldman Sachs Global Tactical Include Emerging Market Diversified Bonds ETFs 6.8 7.7 6.6 9.3
Goldman Sachs Global Tactical Asset Allocation P Goldman Sachs Global Tactical Include Emerging Market Diversified Bonds 9.1  10.4  8.8  10.2


P Relative Strength Trend Following Six Assets:  for more detailed discussions: 

P Goldman Sachs Global Tactical Include Emerging Market Diversified Bonds ETFs: for more detailed discussions: 

It is surprising that the ETF version P Goldman Sachs Global Tactical Include Emerging Market Diversified Bonds ETFs lagged behind the index mutual fund version by a big margin in the last 1,3,5 and 10 years. Trading ETFs is still subject to more volatile price fluctuation and tracking errors. With more and more index mutual funds coming to the markets and less and less holding period restrictions, using index mutual funds is still a better and simpler way if that is possible. 

Overall, the portfolios delivered very reasonable performance in 2012 and continue their solid 5 and 10 year performance. 2012 was the year that proved to be reasonably accommodating to trend following strategies, especially for the cross-major-asset-class ones. Readers, on the other hand, can look at the still dismal performance of commodities trend following portfolios such as those listed on our advanced portfolio pages (for example, P S and P Diversified Trend Indicators). It is again and again to prove that trend following or relative strength works best in a diversified array of major assets, not in a single asset class such as stocks or commodities. See the following on this important point: 

September 10, 2012: Taxonomy Of Momentum, Relative Strength And Trend Following

Conservative and Fixed Income Upgrading Portfolios

The following portfolios are especially useful for income and conservative investors. We show both monthly and quarterly re-balance portfolios for the Morningtar Fixed Income Manager of The Year’s funds portfolios: 

Strategy Name Portfolio 2012 Return 1 year’s AR 3 year’s AR 5 year’s AR
Momentum Scoring P No Load Conservative Mutual Funds Upgrading Quarterly 10 10.4 6.1 7.0
Bond Funds Momentum Based on Upgrading P Bond Funds Momentum Based on Upgrading Fixed Income Managers of the Year`s Funds Monthly 7.3 8.8 7.5 9.9
Bond Funds Momentum Based on Upgrading P Bond Funds Momentum Based on Upgrading Fixed Income Managers of the Year`s Funds Quarterly 6.4  7.9  5.7  8.3

 As we discussed several times previously, we advocate strongly using conservative allocation mutual funds for conservative investors. The nature of the risk level of these funds makes them to have the best risk adjusted returns and thus they are much easier to gain a solid return without incurring too much risk. This might be one of the best ‘open’ secrets many investors don’t realize. 

P No Load Conservative Mutual Funds Upgrading Quarterly: for more discussions: 


P Bond Funds Momentum Based on Upgrading Fixed Income Managers of the Year`s Funds Quarterly: for more discussions: 

As always, we are still very much in favor of the total return bond funds, even amid the bond bubble talks.  A good total return bond (go anywhere) fund manager will still be able to find good opportunities in various bond segments. 

There are many other interesting portfolios on the Advanced->Advanced Strategies‘.  Notice that these portfolios are designed for experienced investors who can construct their overall portfolios using these advanced portfolios as building blocks or references. They are not meant for a beginner. However, you are encouraged to explore and understand the principles behind these portfolios. 

Market Overview

Stocks continued to consolidating. It should be noted that US stocks had much bigger rise since the beginning of the New Year. Gold stabilized and now is ranked above total bond index. Long term Treasury bonds is now ranked at the bottom of the major asset trend ranking table on Asset Trends & Correlations or more detailed ones on 360° Market Overview. For now, we see more risk than safety at these levels of markets. But we will stick to the well established formula to follow the market trends. 

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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