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

We just did a rebalance today. For regular SAA and TAA portfolios, the next re-balance will be on Monday, December 9, 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.

Referral Program

We just released referral program. Since the beginning of our operation five years ago, our mission has always been to provide effective risk managed investment solutions to average investors. We have seen many people have used our programs and many have expressed their strong support to wish us a success. 

Help us, help your friends and help yourself, please refer a friend by clicking on the referral button above. When your friend becomes a subscriber, you will earn a reward. 

Wisdom from a Long Time Practitioner Using Multi-Asset Relative Strength/Momentum

As stated above, since our operation, we have been fortunate to get many well wishes, support and suggestions from our users. Some of these users are experienced professionals who have practiced a similar strategy like what MyPlanIQ offers (see our strategy page). They are delighted to see a systematic offering from us. In the following, we decide to publish a communication from a Senior Portfolio Manager from a major financial firm. For over 20+ years, he has used multi-asset class relative strength/momentum strategies to manage his clients’ investments. He is a firm believer in applying relative strength/momentum strategies to asset allocation, especially in everyone’s retirement 401k and IRA investments. 

The reason this is published anonymously is because of regulatory compliance process. The opinions are strictly the advisor’s personal opinions. They do not represent those of his firm. 

Here is the advisor’s writeup. 

We haven’t talked for a while but I wanted to follow-up with some thoughts regarding our past conversations and the challenges investors face when attempting to implement a quantitative tactical strategy (as opposed to a strategy that relies on fundamentals for portfolio tactics)..

First, it has been my experience that the tactical approach is typically oversold.  That is, too many people have expectations that are unrealistic either through their own lack of research or via vendors providing an incomplete education.  It can be a wonderful CORE strategy and will become more important going forward as more global choices become more liquid and more transparent.

Second, too many people (and vendors) pay attention to the markets.  They then let themselves be swayed away from a strategy that will work if they will focus on just performing the required changes WHEN they are supposed to be effected rather than trying to out-guess the markets as a result of including a bias based upon their interpretation of how current known fundamentals will pan out. The markets are smarter than all of us.  We cannot out-guess any market consistently over the long term.

Third, some people (and vendors) make the job of quantitatively evaluating data for tactical purposes far more complicated than need be.  In fact, the more “stuff” brought to the signal table, the less likely a strategy will be successful. A methodology with many data points required for each signal came about as a result of data mining.  That’s a prescription for disaster.  And we see it all the time in our business.

Individual investors need to be constantly reminded that they cannot out-guess the markets.  Also, reminded that even the best strategies may have only a 50% chance of providing better returns over the short run. The real key to success is not the number of correct signals vs. incorrect, but rather the magnitude of the correct signals vs. the magnitude of the incorrect signals. Missing the large downturn is why most use a tactical approach.  Some of us also use a tactical approach because we do not know what asset classes will be the winners over the next 10 years and which will be the losers; we want the markets to provide guidance and are frankly ambivalent as to which asset classes we use.

What must be particularly frustrating for product vendors such as MyPlanIQ is that you know you have a product that works and can change people’s lives if they would stick with it.  You also know it will underperform periodically; and even for extended periods of time on occasion. And, of course you know that when you have underperformance by a quantitative tactical strategy (at least the straightforward non-data mined ones like MyPlanIQs), there rarely is an actual loss during the underperformance period; the strategy just did not earn the bigger number provided during that period by some other asset class. That is not the case with those that take the buy and hope approach or those that use a fixed value methodology (Enron went from a growth stock to a value stock when some investors and advisors decided it was too cheap not to buy based upon previous years’ experience). They are gambling that what worked in the past long term will work in future long term.  Bond investors will likely learn an ugly lesson over the next 10 to 20 years. (An exception possibly being emerging market bonds as those are becoming more transparent and liquid.)

For what it’s worth (and it may be worth very little) I thought I would share some of my specific thoughts about the MyPlanIQ site….The mission is great.  Clearly there is a lot of effort and execution in place. However, I think in order for it to be a broad offering for 401k plan participants and the IRA rollover market there needs to be a stronger education module, an easier customer service experience, and the capability for potential subscribers to be able to put in their current account value as well as future contributions or withdrawals in some “box” and see how they might do using MyPlanIQ and some other alternatives (Vanguard S&P and balanced, perhaps).  The latter may be a bit of a chore, but you already provide hypothetical returns based upon backtesting specific groups of securities.

Anyhow, I believe in the MyPlanIQ mission. One of my favorite quotes that might be applicable here is from the German philosopher Arthur Schopenhauer……”All great ideas go through 3 stages.  In the first stage, they are ridiculed.  In the second stage, they are strongly opposed.  In the 3rd stage, they are considered to be self-evident.”

I admit to being in the 3rd stage for a while relative to the use of momentum/RS to manage portfolios.  Getting clients to do it themselves is a challenge, but I believe the effort is worthwhile for the guy or gal on the street as well as from a business point of view.

Here is his thought when asked why so many tactical funds have stumbled in the past:

Admittedly, there may also have been a lack of discipline to a degree when managers fell behind and tried to catch up with the wrong assets at the wrong time. I’ve seen that happen with managers that went from being an academic to a real world money manager. It is a challenge intellectually and emotionally to stick with what was considered to be a well thought and highly researched portfolio management strategy when the numbers are going against you. 

My suggestion for all managers (and individual investors acting as their own managers) is to assume nothing. Do not even assume relative strength will work because there will be times when it won’t….and you won’t know those times in advance.

But over the long run, if we can put aside our ego and/or professionally driven assumptions that we know the future, a simple “what is working now” relative strength investment strategy makes sense.  Simple, straight forward, easy to implement…..those are the key ingredients.

Portfolio Performance Review

Here is the performance of  tactical and strategic portfolios listed on Brokerage Mutual Fund Portfolios

 All data are as of 11/4/2013

Latest Featured ETF Tactical Portfolios Performance Comparison


Latest Featured ETF Strategic – Optimal Portfolios Performance Comparison

Tactical have mostly out performed their strategic counterparts. We note that we are not advocating using mutual funds in TDAmeritrade for tactical purpose because of its excessive 6 months (180 days) minimum holding period restriction for each no load and no transaction fee fund unless your account is large enough to make the $50 fee per trade insignificant. 

Market Overview

We see no substantial change from the markets last week. On one hand, we are entering the post Halloween season, a season that is usually favorable for risk assets such as stocks. On the other hand, stocks have stretched so much. For now, stay the course is the best one can do.  For more detailed, please refer to  360° Market Overview

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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Any investment in securities including mutual funds, ETFs, closed end funds, stocks and any other securities could lose money over any period of time. All investments involve risk. Losses may exceed the principal invested. Past performance is not an indicator of future performance. There is no guarantee for future results in your investment and any other actions based on the information provided on the website including, but not limited to, strategies, portfolios, articles, performance data and results of any tools. All rights are reserved and enforced. By accessing the website, you agree not to copy and redistribute the information provided herein without the explicit consent from MyPlanIQ.