Re-balance Cycle Reminder All MyPlanIQ’s newsletters are archived here.

For regular SAA and TAA portfolios, the next re-balance will be on Monday, July 22, 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.

Half Year Portfolio Reviews

Now that we are entering the second half of 2013, it is a good time to review how various portfolios have done for the first half of the year. 

Asset Class Performance

Here are the performance data for six major asset classes: 

Portfolio Performance Comparison (as of 7/1/2013)

Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR
VTI (Vanguard US Stocks) 14.8% 25.1% 18.6% 7.5%
VNQ (Vanguard US REITs) 6.0% 12.8% 17.6% 7.7%
VEA (Vanguard Euro Pacific) 4.1% 24.1% 11.0% -0.1%
BND (Vanguard US Total Bond) -2.7% -2.0% 2.7% 4.7%
DBC (PowerShares DB Commodity Index) -9.0% 1.4% 5.6% -10.8%
VWO (Vanguard Emerging Market Stocks) -11.6% 5.1% 1.7% -0.8%

**YTD: Year to Date

As the ‘cleanest dirty shirt’, U.S. stocks have out performed other stock markets by a big margin. The worst performer, emerging market stocks suffered from many uncertainties and slowing economy.  U.S. Real Estate Investment Trusts (REITs) were in much favor by yield hungry investors who are looking for income and something tangible to help counter the very much feared future inflation due to global central banks’ loose monetary policies. However, REITs were slammed hard in June because of the Fed’s Quantitative Easing tapering talk.  Along with it came one of the biggest bond crash that brought bonds’ rare loss in the first half of the year. 

Even with upcoming inflation anxiety, commodities and precious metals were hit hard: a somewhat paradoxical event. There weakness are pointing to deflation pressure instead of inflation. However, their weakness is also exacerbated by the strength of U.S. dollars. Investors perhaps perceived that U.S. dollars, with their currency reserve status, were the brightest among major currencies that all suffered from the relentless money printing or debt piling in their host countries. 

We encourage our readers to browse 360° Market Overview page for all other asset class performance. 

Global Portfolios Suffered While U.S. Tilted Portfolios Outshined

The following table shows how some of well known strategic allocation portfolios have performed: 

Portfolio Performance Comparison

Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 5Yr Sharpe 10Yr AR 10Yr Sharpe
VBINX 6.7% 13.2% 11.3% 6.7% 0.44 6.8% 0.47
Fidelity Managed Accounts Growth with Income 4.4% 10.5% 9.8% 5.0% 0.34 6.8% 0.5
Amerivest Guided Portfolio Growth 4.2% 10.9% 10.5% 5.5% 0.29    
Morningstar Ibbotson Balanced ETF Portfolio 3.4% 10.0% 9.5% 4.9% 0.29    
Schwab Managed ETF Portfolios Balanced with Growth 2.7% 10.3%          
AssetBuilder Model Portfolio 09 2.3% 9.3% 6.3% 2.9% 0.18    
Six Core Asset ETFs Strategic Asset Allocation – Optimal Moderate 1.5% 9.7% 9.1% 4.4% 0.25 6.2% 0.39
Wealthfront Moderate Portfolio 0.4% 6.6% 7.6% 3.9% 0.22    
Six Core Asset ETFs Strategic Asset Allocation – Equal Weight Moderate 0.3% 7.9% 8.1% 3.1% 0.18 6.9% 0.44

**YTD: Year to Date

See the latest year by year comparison >>

We reviewed many of these portfolios in our previous newsletter July 30, 2012: Strategic Asset Allocation & Lazy Portfolios Review. It isn’t a surprise that portfolios that are more overweighted on U.S. stocks and their styles had better year to date returns. This is exemplified by the fact that Vanguard balance fund index VBINX, which has 60% in US stocks and 40% in US bonds, did the best among all of the above global oriented diversified portfolios.  

2013 so far also proved to be very challenging to equal weight portfolios, which were proved to be reasonably good allocations both by academic studies and by past performance (see, for example, July 18th 2011: Equal Weight or Not Equal Weight in Strategic Asset Allocation?). With one sided out performance by US stocks, our benchmark portfolio Six Core Asset ETFs Strategic Asset Allocation – Equal Weight Moderate came in at the last place in this first half year ranking. 

Readers should be also advised that several portfolios are not necessarily of the same 40% bond allocations as other moderate risk (40% bonds and 60% stocks). For example, Morningstar Ibbotson Balanced ETF Portfolio and Amerivest Guided Portfolio Growth have only 30% allocated in bonds, making the above comparison not exactly apple to apple. 

Tactical Allocation Portfolios

The Tactical Asset Allocation portfolios performed as what we expected: in fact, in most cases, they are performing in par with their  Strategic Asset Allocation – Optimal counter parts. The following is the performance comparison for our featured ETF portfolios

Portfolio Performance Comparison (as of 7/1/2013)

Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 5Yr Sharpe 10Yr AR 10Yr Sharpe
MyPlanIQ Diversified Core Allocation ETF Plan Tactical Asset Allocation Moderate 0.9% 8.5% 7.7% 6.1% 0.57 10.4% 0.9
Permanent Global Portfolio ETF Plan Tactical Asset Allocation Moderate 1.2% 5.0% 8.2% 7.5% 0.66 10.4% 0.84
Retirement Income ETFs Tactical Asset Allocation Moderate 0.7% 5.5% 9.5% 8.6% 0.81 10.9% 0.92
Six Core Asset ETFs Strategic Asset Allocation – Optimal Moderate 1.5% 9.7% 9.1% 4.4% 0.25 6.2% 0.39
Six Core Asset ETFs Tactical Asset Allocation Moderate 2.7% 7.3% 6.8% 5.7% 0.53 10.0% 0.83
Vanguard ETFs Tactical Asset Allocation Moderate 0.9% 6.6% 9.5% 8.6% 0.72 9.9% 0.76

**YTD: Year to Date

See latest year by year comparison >>

Six Core Asset ETFs Tactical Asset Allocation Moderate benefited from its simplicity while Retirement Income ETFs Tactical Asset Allocation Moderate and MyPlanIQ Diversified Core Allocation ETF Plan Tactical Asset Allocation Moderate were affected by June’s rate-induced mini-crash: the high performing dividend paying stock funds were hit harder than others. 

Overall, we are confident that these portfolios will carry us through the coming years that are expected to be full of crisis and uncertainties. However, investors should be also aware of its pros and cons, as discussed in our previous newsletters: 

Total Return Bond Fund Portfolios

We first introduced these portfolios in our newsletter June 3, 2013: Total Return Bond Fund Portfolios For Major Brokerages. We would like to quote from the newsletter: 

As mentioned many times previously, we believe there still exist many opportunities in fixed income investments so long you are tactical and nimble. We also believe that great bond managers are able to capture these opportunities, even in the more difficult situations in the future.

It is thus a good time to review how these portfolios withstood the bond scare last month: 

Portfolio Performance Comparison (as of 7/1/2013)

Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 5Yr Sharpe 10Yr AR 10Yr Sharpe
Schwab Total Return Bond 0.5% 7.1% 6.9% 8.0% 1.93 6.5% 1.42
Etrade Total Return Bond 0.5% 7.1% 6.7% 7.7% 1.82 6.3% 1.34
FolioInvesting Total Return Bond 0.5% 7.1% 6.9% 7.9% 1.9 6.4% 1.4
TDAmeritrade Total Return Bond -0.3% 6.7% 7.4% 8.6% 2.18 7.0% 1.59
Fidelity Extended Fund Picks Bond Trend Following -1.0% 6.3% 7.9% 8.6% 1.79 6.4% 1.15
VBMFX -2.7% -1.1% 3.4% 5.1% 1.16 4.4% 0.8
PTTRX -3.2% 1.2% 4.7% 7.3% 1.64 6.0% 1.13

**YTD: Year to Date

We are pleased that most of our portfolios did better than PIMCO total return bond fund (PTTRX). In fact, in the last rebalance,  many of these portfolios went into cash for their majority allocation, just in time to avoid further bond decline. 

We are in the process of start to support these portfolios officially. We encourage you to check them out. These portfolios are created for specific brokerages and they obey brokerages and funds’ minimum holding period requirements. We believe they are fully implementable in their brokerages. 

Unlike P Bond Funds Momentum Based on Upgrading Fixed Income Managers of the Year`s Funds Monthly listed on the Advanced Strategies page, these portfolios only require basic subscription to customize a portfolio (please use risk profile 100 in this process). 

Market Overview

It looks like that markets have somewhat stabilized in the bond-tapering, China credit strain or whatever induced correction last month. For now, US stocks and international stocks are on firm ground while REITs recovered a bit (though near term they are still weak in terms of trend/strength measurement). 

Please refer to  360° Market Overview or Asset Trends & Correlations for various asset class trend rankings. At current level, Treasury bonds are in a better valuation. 

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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