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Re-balance Cycle Reminder
The next re-balance will be on Monday, April 8, 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.
Advanced Static Portfolios or Template Based Portfolios
Many experienced users have requested a feature that allows them to use their own target allocations (percentages) of asset classes over a list of funds to build strategic asset allocation portfolios. The portfolios will be periodically rebalanced (monthly, quarterly or even annually) using our fund selection algorithm. These portfolios are similar to our Strategic Asset Allocation – Equal Weight or Strategic Asset Allocation – Optimal based portfolios but they have their own target allocations instead.
We are pleased to announce that this feature is now available to expert or pro subscribers.
In the following, we will go through the flow briefly:
- How to invoke: once you log onto account, go to Dashboard > Static Portfolios (Left Panel) and click on ‘Create an Advanced Static Portfolio‘. If you are not an expert subscriber, you will be reminded to subscribe to access to this feature.
- You enter the list of fund ticker symbols in a text box, similar to creating your plan. You then will be able to specify the target allocations for asset classes covered by these funds.
- You can then back test (simulate) the portfolio and furthermore, from now on, the portfolio is monitored daily. When it comes to re-balance time, it will generate re-balance transactions and email you.
Using Lazy portfolio allocations as templates for brokerage mutual fund plans
One of the main advantages for the advanced static portfolios is to apply your favorite lazy portfolio allocations to a particular set of funds such as Schwab OneSource Select List Funds or Fidelity Extended Fund Picks or a 401k plan.
In the following, we present several results using this new feature.
David Swensen’s lazy portfolio
Yale’s Endowment manager David Swensen’s lazy portfolio as a template (see P David Swensen Yale Individual Investor Portfolio Quarterly Rebalancing for the description of the lazy portfolio):
- Swensen Schwab OneSource Select List Funds: applied to funds in Schwab OneSource Select List Funds.
- Swensen Fidelity Fund Picks: applied to funds in Fidelity Extended Fund Picks
- Swensen Vanguard Index Funds: applied to funds in Vanguard All Index Funds Investor Class
- Swensen Schwab Income Mutual Fund Select: applied to funds in Schwab Income Mutual Fund Select List
- Swensen Retirement Income ETFs: applied to funds in Retirement Income ETFs
All of the above advanced static portfolios are re-balanced quarterly. There shouldn’t be any problem for redemption charge or minimum holding period restriction.
The following are the back testing results for these portfolios:
Portfolio Performance Comparison (as of 3/22/2013)
| Ticker/Portfolio Name | 1 Week Return* |
YTD Return** |
1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe | 10Yr AR | 10Yr Sharpe |
|---|---|---|---|---|---|---|---|---|---|---|
| VFINX | -0.7% | 9.2% | 13.7% | 105.3% | 12.2% | 65.9% | 5.3% | 19.9% | 7.7% | 31.7% |
| Swensen Schwab OneSource Select List Funds | -0.3% | 4.4% | 9.6% | 118.1% | 11.4% | 87.4% | 6.1% | 30.6% | 9.9% | 58.2% |
| P David Swensen Yale Individual Investor Portfolio Quarterly Rebalancing | -1.0% | 3.2% | 9.7% | 127.5% | 11.7% | 93.9% | 6.6% | 32.9% | 10.3% | 59.8% |
| VBINX | 0.0% | 5.7% | 9.7% | 138.7% | 9.6% | 91.3% | 6.1% | 40.0% | 7.6% | 52.6% |
| Swensen Fidelity Fund Picks | -0.5% | 3.0% | 14.0% | 237.1% | 14.0% | 142.3% | 9.2% | 53.4% | 11.5% | 78.4% |
| Swensen Vanguard Index Funds | -0.2% | 3.8% | 10.6% | 182.8% | 11.5% | 115.3% | 7.1% | 43.2% | 10.2% | 71.2% |
| Swensen Schwab Income Mutual Fund Select | 0.0% | 4.0% | 10.0% | 158.4% | 9.5% | 101.1% | 7.3% | 58.5% | 8.8% | 78.7% |
| P David Swensen Yale Individual Investor Portfolio Annual Rebalancing | -0.6% | 3.7% | 10.0% | 127.1% | 10.9% | 88.5% | 6.4% | 33.1% | 10.3% | 61.3% |
| Swensen Retirement Income ETFs | 0.1% | 4.1% | 11.1% | 171.1% | 10.5% | 100.3% | 5.6% | 33.6% | 5.1% | 32.2% |
*: NOT annualized
**YTD: Year to Date
See more detailed year by year comparison >>
We make the following observations:
- Swensen Fidelity Fund Picks out performed the original index fund based portfolio (P David Swensen Yale Individual Investor Portfolio Quarterly Rebalancing), while others are on par. This indicates that it is of good value to use Swensen lazy portfolio template to a set of mutual funds and re-balance periodically.
- Swensen Retirement Income ETFs didn’t do well in the past 5 and 10 years. That is mostly due to the reason that many ETFs in the plan have up to 5 year history.
- Other than Swensen Retirement Income ETFs, all portfolios did much better than the standard 60% stocks and 40% bonds Vanguard balanced fund index (VBINX). Though Swensen’s lazy portfolio allocates 70% to stocks, we believe the out performance still holds even for the 60%/40% allocations.
John Wasik and Rick Ferri’s Lazy Portfolios
Portfolio Performance Comparison (as of 3/22/2013)
| Ticker/Portfolio Name | 1 Week Return* |
YTD Return** |
1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe | 10Yr AR | 10Yr Sharpe |
|---|---|---|---|---|---|---|---|---|---|---|
| Wasik`s Nano | -0.6% | 4.0% | 8.0% | 104.6% | 7.9% | 63.8% | 3.9% | 20.6% | ||
| Wasik Nano Vanguard Index Funds | -0.3% | 4.7% | 11.6% | 170.2% | 10.3% | 91.3% | 6.1% | 34.7% | 9.8% | 64.0% |
| Wasik Nano Schwab OneSource Mutual Fund Select | -0.3% | 3.9% | 12.4% | 219.7% | 10.1% | 121.6% | 6.9% | 66.4% | 9.0% | 98.5% |
| Wasik Nano Fidelity Fund Picks | -0.6% | 3.8% | 14.7% | 228.9% | 11.2% | 103.3% | 7.6% | 42.7% | 10.1% | 66.7% |
| VFINX | -0.5% | 8.8% | 12.5% | 105.3% | 11.8% | 65.9% | 5.0% | 19.9% | 7.9% | 31.7% |
| VBINX | 0.0% | 5.7% | 9.7% | 138.7% | 9.6% | 91.3% | 6.1% | 40.0% | 7.6% | 52.6% |
| Rick Ferri Core Four Schwab OneSource Muutal Fund Select | -0.2% | 4.9% | 12.4% | 217.4% | 10.9% | 124.6% | 6.8% | 54.8% | 9.1% | 83.9% |
| Rick Ferri Core Four Moderate Fidelity Fund Picks | -0.7% | 4.8% | 16.7% | 258.0% | 11.4% | 100.9% | 6.8% | 39.6% | 9.6% | 66.2% |
| Rick Ferri Core Four Lazy Portfolio | -0.4% | 3.9% | 8.7% | 118.5% | 9.1% | 83.3% | 5.4% | 33.9% | 8.4% | 59.9% |
*: NOT annualized
**YTD: Year to Date
See more detailed year by year comparison >>
Again, we are seeing
- All of the mutual fund based advanced static portfolios out performed their original index fund based portfolios by a big margin.
- Similarly all of the portfolios our performed VBINX significantly.
This new feature opens up various opportunities such as applying permanent or all weather portfolio allocations to a brokerage recommended set of funds. We will discuss this in more details in a follow up newsletter.
Portfolio Performance Review
The following shows how several brokerage suggested portfolios have performed recently:
Portfolio Performance Comparison (as of 3/22/2013)
| Ticker/Portfolio Name | 1 Week Return* |
YTD Return** |
1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe | 10Yr AR | 10Yr Sharpe |
|---|---|---|---|---|---|---|---|---|---|---|
| Amerivest Guided Portfolio Growth | -0.7% | 4.4% | 8.1% | 89.9% | 8.5% | 64.1% | 5.3% | 28.1% | ||
| VBINX | 0.0% | 5.7% | 9.7% | 138.7% | 9.6% | 91.3% | 6.1% | 40.0% | 7.6% | 52.6% |
| Fidelity Managed Accounts Growth with Income | -0.4% | 4.1% | 6.8% | 97.7% | 7.3% | 69.0% | 4.6% | 33.3% | 7.7% | 58.2% |
| Schwab Managed ETF Portfolios Balanced with Growth | -0.5% | 3.5% | 6.7% | 80.2% |
*: NOT annualized
**YTD: Year to Date
Overall, all portfolios are doing ok, given the recent stock market strength and anemic (but not horrible bond markets).
Market Overview
Though both US and developed country stock markets have withstood Cyprus bank crisis well till now, we observed that emerging market stocks have quietly under performed both cash and total bond index, joining commodities to be ranked at the bottom on the major asset trend ranking table on Asset Trends & Correlations (for other detailed ranking, see 360° Market Overview). This should alert us on a possible turn of 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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How can we improve this newsletter — we value your inputs –Thanks to those who have already contributed — we appreciate it.
