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Re-balance Cycle Reminder

The next re-balance will be on Monday, May 13, 2013. 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.

Account Rebalance – Ease of Use

One of the most often asked questions is on ease of use: how easy for a user to follow a MyPlanIQ’s model portfolio in their accounts.  After all, the model portfolios are just model portfolios, they are not the same as your actual investment accounts. 

In the following, we address two main issues in this area. 

Customize Your Own Portfolio To Reflect Your Investment Account

So you have a 401(k), brokerage IRA or taxable account and you would like to follow a MyPlanIQ’s portfolio. After going through due diligence, you decide to use a particular portfolio. Let’s say you would like to follow a TAA portfolio from MyPlanIQ Diversified Core Allocation ETF Plan

The next step is to either follow a pre-built portfolio that is usually of risk profile 40, i.e. moderate risk in common terms. You can do this by clicking on the Follow button on that portfolio page. 

However, most of times, you would like to follow a portfolio that is of a particular risk profile. To do so, you can click on the Customize button on a portfolio page.  You then enter the risk profile and re-balance frequency (such as monthly or quarterly or annually) to get current holding suggestions and build a customized portfolio of your own. Notice if you use ‘Get Started Now’ flow, it will always build a custom portfolio for you. No follow. 

In addition to personalized risk profile and other parameters, one important advantages of customize a portfolio of your own is that the portfolio’s start date will be the next trading date. This portfolio has its own holding periods for funds it buys and sells. If you follow this portfolio rebalance emails/instructions precisely, your actual account will be in sync with the portfolio. 

Since every fund in a MyPlanIQ’s plan has its own minimum holding period info (such as minimum 30 days for TDAmeritrade commission free ETFs or 90 days for its No Transaction Fee No load Premier funds, the parameter name is R) and the portfolio’s rebalance will NEVER violate such requirements, if you follow the portfolio precisely in your account, you will not violate these requirements and thus avoiding redemption fees or other penalty fees. 

We strongly suggest everyone to customize a portfolio instead of following a portfolio. The Follow feature was a legacy artifact that we are planning to deprecate very soon. 

Rebalance — Basket Trading Or Multiple Orders

The other often complained issue is the implementation of re-balance instructions in an investment account. We review types of investment accounts here: 

1. Rebalance 401(k) or variable annuity or other non-brokerage based retirement accounts

Most of this type of accounts are mutual fund based. Fortunately, virtually every one of them today provides a basket re-balance feature: you specify target allocation % (or dollar amounts) for each fund and press a button to issue the rebalance. The rebalance will often happen after 4pm EST after market close. It will do All of the jobs for you. No multiple buy/sell orders, just overall allocations. 

For these accounts, all you need to do is to copy the expected holding percentages (or holding percentages if you are joining in the middle, again, only happens if you are Following a portfolio, not customizing one) and enter them to your account. 

2. Rebalance mutual fund based brokerage IRA or taxable accounts

MyPlanIQ features many brokerage based mutual fund plans such as those listed on  Brokerage Mutual Fund Portfolios. Unfortunately, since most brokerages in the US are designed to encourage trading, it is rare for a brokerage to support portfolio re-balance feature mentioned above for 401k accounts (other than, more on this later). 

However, since mutual funds are only traded once per day at the end of market close (usually after 4pm EST), it is still relatively easier to carry out re-balance for an all mutual fund account. To do so, one needs to enter sell and buy orders using ‘estimated’ dollar amount for each fund. A mutual fund order can be number of shares based or dollar amount based. The process is often as follows: 

  • Translate sell and buy percentages in the rebalance instruction to dollar amounts based on your current account amount. 
  • First enter sell orders using dollar amounts. In the case of selling out a fund completely, use number of shares or sell all order if such an order is available.
  • Now based on the above, enter the buy orders. In the case there is a sell all order in the above, you’ll have to underestimate the amount to buy to make sure there is enough cash for all of the buy orders. 
In general, there might be some fraction of cash left and you can use them in the next rebalance cycle. 
All in all, rebalancing a mutual fund based portfolio is not a disaster and still relatively easy. 
Note, very often we are asked by users questions like ‘I try to sell a mutual fund but that will incur redemption fee or short term transaction fees by the brokerage’. As we stated above, if you customize your own portfolios to follow instead of following a pre-built portfolio, unless there is an error in our fund’s R parameter (that represents the minimum number of months to hold a fund), you shouldn’t see a fee charged. We again rely on our users to give us update on the funds’ redemption parameter and other parameters such as waiting period (parameter WP). 

3. Rebalance ETF based brokerage portfolios

Rebalancing ETF based portfolios such as those listed on Overview & Featured ETF Portfolios or Brokerage Specific ETF Portfolios is by far the hardest (but also the most flexible). Since ETFs are priced continuously during a trading day, it provides opportunities for users who are experienced and active in trading to capture better pricing. However, for most investors, it is more a nuisance than a convenience. 

Unfortunately, as far as we know, all brokerages other than provide non basket type re-balance orders as those mentioned in 401k accounts. For these brokerages, you have to issue one order per one fund. 

Several tips for rebalancing these portfolios

  • Avoid executing ETF orders in the first 30 minutes after market opens. Notice although in MyPlanIQ, we maintain portfolio bookkeeping using open orders. This is more an arbitrary pick, a pick that we believe could underestimate a portfolio performance most times (due to erratic market opening behavior, trading in the first 30 minutes is usually more harmful than beneficial). Some people believe that executing orders in the last 30 minutes is the best as many institutional orders are done at that time. However, we have not seen concrete evidence or systematic report to support this claim. 
  • Usually sell orders first and then buy orders. Always make sure you have enough case to execute a buy order. But you can interleave these orders (i.e. you don’t need to wait until all sell orders are executed before executing buy orders) if you have time. This practice is again not advised for average investors. 

Notice that ETFs, like stocks, are settled 3 days later after trade date. In general, executing sell and buy orders in the same day shouldn’t be a problem. However, some users have told us that there is a problem in their IRA accounts in doing same day buy and sell. We encourage these users to bring up their problems in our forums and we welcome anyone to join in to address this type of questions. 

For many users who don’t want to deal with the above hassle in rebalancing, they can consider to use which provides a basket re-balance capability even for ETFs (and stocks). This is called one-click rebalance by us. In essence, users can setup a portfolio (or called folio by with target percentages for funds in consideration and then click on a button to instruct FolioInvesting to carry out the whole re-balance process. These trades are usually grouped together and traded in two windows of trading: 11am and 2pm (see Window Trades on Based on FolioInvesting, these trades are usually very reasonable in terms of quality. 

The rebalance activity is then reduced to how to setup the target percentages for a folio. MyPlanIQ provides two ways to handle this: 

Method 1: For  MyPlanIQ Diversified Core Allocation ETF Plan,  MyPlanIQ provides pre-configured 10 folios, 5 for SAA-Equal Weight (free, listed on Folio’s Ready to Go folio page) and 5 for TAA (you’ll have to be a MyPlanIQ’s basic subscriber to access to these 5 premium folios).  These folios cover 5 different risk levels (growth, moderate, balanced, conservative and very conservative). You can follow them in your folio’s accounts. 

Before a re-balance trading day, MyPlanIQ will update these folios so that in the trading day, you’ll be able to perform one-click rebalance to finish the rebalance tasks in your folio accounts. 

Instructions on how to access premium TAA folios in your folio accounts: 

  1. 1). Become a basic or expert subscriber on
  2. 2). (only one time) log onto your account, click on the link listed on Overview & Featured ETF Portfolios (next to  MyPlanIQ Diversified Core Allocation ETF Plan) or the link Folio Investing one-click portfolio management based on MyPlanIQ model portfolios listed on the plan page MyPlanIQ Diversified Core Allocation ETF Plan
  3. 3). (only one time) Scroll down to MyPlanIQ Tactical Allocation Model Portfolios on table and click on any of the links Goto FolioInvesting to visit Remember, you’ll need to log onto your MyPlanIQ premium account to do so. 
  4. 4). (only one time) Now, on, either open your account or log onto your account. Your account will be tagged as a MyPlanIQ premium user’s account. You will then be able to see MyPlanIQ’s 5 TAA premium folios (in addition to the free 5 MyPlanIQ SAA folios). 
  5. 5). Next time when you log onto your folio account, you’ll be able to access to MyPlanIQ’s folios. 

Unfortunately, due to monthly manual update constraints, right now, MyPlanIQ only offers the 10 pre-configured folios for MyPlanIQ Diversified Core Allocation ETF Plan. If you would like to see us to support more folios for other plans, please email us a request. We will consider to expand the offerings depending on the requests we receive. 

Method 2: For any portfolio in an ETF plan, you can still enjoy the one-click feature provided by FolioInvesting with some extra effort. To do so, follow the following instructions: 

  1. On the re-balance day (or a day before the re-balance day), visit the MyPlanIQ model portfolio page you follow (example, say you are following Retirement Income ETFs Tactical Moderate Portfolio for Retirement Income ETFs plan. 
  2. Scroll down to find the following two links: Instructions On and Download Current Holdings to FolioInvesting CSV file  
  3. The first link gives you step by step instructions on how to upload the Microsoft Excel CSV file downloaded through the second link to your Folio account to establish target percentages. 
  4. Once you have setup your target percentages, you can issue one-click rebalance. 
The following shows some of the key steps illustrated on  Instructions On
Note: the above steps are also applicable to a mutual fund based portfolio though before following a mutual fund portfolio on, you’ll need to make sure FolioInvesting has these mutual funds. We are planning to provide no load mutual fund portfolios for FolioInvesting in the future. 
Notice also that even though FolioInvesting does not provide commission free ETFs, it provides a flat fee $290 per year for unlimited rebalances. See its Pricing for more details. 

To summarize, FolioInvesting’s basket trading re-balance capability provides ease of use for managing a long term portfolio. We are just as hopeful to see other brokerages to start to support this feature that has been available for professional asset managers and institutions for a long time. 

Portfolio Performance Review

Closed end funds (CEFs) are of interests to investors who like their high yields. In general, we don’t recommend using arbitrary CEFs to construct an asset allocation portfolios as many CEFs are highly volatile. However, a simplified plan that only deals with 5 or 6 major asset classes are still of values. The following table shows how TAAs for 5 or 6 core asset CEFs are compared with their ETF counter parts: 

Portfolio Performance Comparison (as of 4/22/2013)

Ticker/Portfolio Name 1 Week
1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe 10Yr AR 10Yr Sharpe
Five Core Asset CEFs Tactical Asset Allocation Moderate -0.0% 5.8% 5.6% 0.65 7.9% 0.68 11.8% 0.91 13.3% 93.0%
Five Core Asset Index ETF Funds Tactical Asset Allocation Moderate 0.6% 2.3% 4.8% 0.78 6.0% 0.69 8.2% 0.85 10.9% 93.4%
MyPlanIQ Diversified Core Allocation ETF Plan Tactical Asset Allocation Moderate 1.2% 5.1% 13.0% 2 7.1% 0.74 7.5% 0.7 11.0% 97.1%
Six Core Asset CEFs Tactical Asset Allocation Moderate CEF Corrected 0.2% 6.9% 7.7% 0.96 5.9% 0.45 10.1% 0.68 12.0% 76.9%
Six Core Asset ETFs Tactical Asset Allocation Moderate 0.5% 3.2% 7.5% 1.24 4.8% 0.51 6.5% 0.61 10.6% 88.4%
VBINX 0.4% 6.4% 10.7% 1.44 9.1% 0.86 5.8% 0.37 7.6% 52.5%
VFINX 0.7% 10.2% 15.2% 1.19 11.2% 0.61 4.6% 0.17 8.0% 32.1%

*: NOT annualized

**YTD: Year to Date

Detailed comparison >>

We can see that in general, CEF based portfolios provide higher returns with extra volatility. However, CEF portfolios’  Sharpe ratios are very comparable with their ETF counterparts. There are many ways to enhance such portfolios if one wishes to spend efforts and deal with relatively low volumes in CEF trading. 

Market Overview

Equities are still trying to hang on there with long term Treasuries and international stocks trading places in the major asset trend ranking table on Asset Trends & Correlations (for other detailed ranking, see 360° Market Overview) several times. For now, emerging market stocks and commodities, two of the 5 major risk assets, remain below US bonds. 

Gold had some rebound but is still long way off at the bottom of the trend ranking table. 

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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