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, June 2, 2014. 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.

Asset Allocation Funds Review

Now that we begin to enter the summer season, it is interesting to review how several asset allocation funds have been doing.  Previously, we did a review on these funds in newsletter  June 17, 2013: Well Known Asset Allocation Fund Review almost a year ago.

Balanced and world allocation funds review

The following table shows how both U.S. centric balanced funds and world allocation funds have done recently: 

Asset Allocation Fund Performance Comparison (as of 5/5/2014): 

Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 5Yr Sharpe 10Yr AR 10Yr Sharpe
HSGFX (Hussman Strategic Growth) 0.6% -3.0% -5.4% -4.9% -0.69 -1.2% -0.26
FPACX (FPA Crescent) 1.8% 13.7% 8.2% 13.2% 1.42 8.2% 0.72
MNBAX (Manning & Napier Pro-Blend Extnd Term S) 3.9% 12.6% 8.2% 12.9% 1.18 7.5% 0.5
SVBIX (JHancock Balanced I) 2.5% 12.5% 9.5% 13.2% 1.19 9.6% 0.66
GRSPX (Greenspring) -0.2% 11.7% 7.4% 10.1% 1.13 6.6% 0.54
PRWCX (T. Rowe Price Capital Appreciation) 3.8% 16.7% 11.9% 16.6% 1.51 9.1% 0.57
BRUFX (Bruce) 9.1% 19.9% 10.4% 19.8% 2.01    
VBINX (Vanguard Balanced Index Inv) 2.5% 11.9% 9.6% 13.7% 1.35 7.0% 0.51
GBMFX (GMO Benchmark-Free Allocation III) 2.6% 7.5% 7.6% 10.4% 1.44 9.5% 1.09
PASDX (PIMCO All Asset D) 3.6% 1.0% 4.8% 10.6% 1.94 6.7% 0.69
PGMAX (PIMCO Global Multi-Asset A) 2.2% -9.6% -2.4% 5.8% 0.65    
WASYX (Ivy Asset Strategy Y) -2.5% 15.4% 6.5% 11.8% 0.68 12.5% 0.74
SGIIX (First Eagle Global I) 3.2% 12.0% 7.9% 14.5% 1.21 10.7% 0.74
MALOX (BlackRock Global Allocation Instl) 1.0% 9.0% 5.0% 10.8% 1.01 8.7% 0.68
DMLIX (DoubleLine Multi-Asset Growth I) 0.5% 4.3% 1.1%        
EAXFX (Wells Fargo Advantage Asset Alloc R) 2.8% 7.8% 6.1% 10.8% 1.12 6.3% 0.53

**YTD: Year to Date

Year by year detailed comparison >>

We have highlighted the funds. The first batch of funds are U.S. centric balance funds: they usually allocate to both US only stocks and bonds. The third batch of funds are world allocation funds that can allocate to global stocks and bonds. VBINX (Vanguard Balanced Index Inv) is a 60% US stocks and 40% US bonds benchmark index fund. 

What we see is in the last 1 year, that most US centric funds out performed their benchmark VBINX while other than WASYX (Ivy Asset Strategy Y) and SGIIX (First Eagle Global I), all of world allocation funds under performed VBINX. The under performance of international and emerging market stocks did hurt their performance (see April 7, 2014: The Unbeatable US Stocks And Bonds Balance Portfolio? and March 31, 2014: Strategic Asset Allocation Portfolio Review). 

Among the US centric balance funds, BRUFX (Bruce) is a stand out. This fund is actually a go anywhere stock and bond fund. In addition to stocks, it can invest in convertibles, high yield bonds and zero coupon bonds. This father and son co-managed fund has kept a low profile.   

Year to date, the performance has become more mixed: several world allocation funds have done well. This is due to a more balanced performance among major risk asset classes, as shown in the table below. 

Risk Asset Classes Performance Comparison (as of 5/5/2014 using index ETF funds): 

Ticker/Portfolio Name YTD
1Yr AR 3Yr AR
VTI (Vanguard Total Stock Market ETF) 2.1% 20.8% 13.6%
VEA (Vanguard MSCI EAFE ETF) 1.8% 14.0% 5.6%
VWO (Vanguard MSCI Emerging Markets ETF) 0.5% -2.7% -4.1%
VNQ (Vanguard REIT Index ETF) 14.2% 1.5% 9.8%
VNQI (Vanguard Global ex-US Real Estate ETF) 1.8% -5.7% 5.8%
HYG (iShares iBoxx $ High Yield Corporate Bd) 3.2% 4.1% 7.3%

We suspect that a good allocation to convertibles (bonds) and high yield bonds in funds like PRWCX (T. Rowe Price Capital Appreciation) or BRUFX (Bruce) have also helped these funds’ performance. 

We also note that year to date, US REITs have done exceptional well, though that is on the basis of last year’s lousy loss. 

HSGFX (Hussman Strategic Growth) and PASDX (PIMCO All Asset D) have recovered somewhat year to date. But it will take a while for them to recoup their under performance in the past 5 or 10 years (especially for Hussman fund). 

Risk parity and permanent portfolios

Risk parity and permanent portfolios continued their good performance year to date, due to the strong performance of long bond and gold (somewhat) so far: 

Portfolio Performance Comparison (as of 5/5/2014):

Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 5Yr Sharpe 10Yr AR 10Yr Sharpe
Bridgewater All Weather Portfolio Risk Parity 3.3% -1.0% 4.3% 7.4% 2.14 6.3% 1.32
Bridgewater All Weather Portfolio 3.7% 0.7% 5.0% 9.4% 1.83 7.7% 1.16
Harry Browne Permanent Portfolio 5.4% 1.3% 4.5% 8.2% 1.25 7.5% 0.91
ABRRX (Invesco Balanced-Risk Allc R) 2.7% 1.4% 7.3%        
AQRNX (AQR Risk Parity N) 5.2% -1.8% 5.4%        
PRPFX (Permanent Portfolio) 3.3% 2.7% 0.7% 9.3% 0.93 8.5% 0.69

The ongoing deleveraging in developed countries and slow economic rebalance in developing countries  continue to depress interest rates. Europe, for example, is now facing deflation threat. PIMCO’s Gross even stated that the long term rate will be around 2% (see Bill Gross’ Achoo Message). All of these are in favor of risk parity and permanent portfolios types of allocation. 

Tactical allocation funds 

 The following is a list of funds we monitored often. These tactical funds use somewhat similar technique as MyPlanIQ Tactical Asset Allocation (TAA) strategy, we thus also compare them with our simple flagship ETF tactical portfolio Six Core Asset ETFs Tactical Asset Allocation Moderate which uses only 6 index ETF funds (mostly Vanguard ETFs) as its candidate funds. 

Portfolio Performance Comparison (as of 5/5/2014): 

Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 5Yr Sharpe 10Yr AR 10Yr Sharpe
Six Core Asset ETFs Tactical Asset Allocation Moderate 2.9% 9.3% 6.6% 10.0% 0.98 10.5% 0.93
GTAA (Cambria Global Tactical ETF) 4.0% 0.6% -0.6%        
GDAFX (Goldman Sachs Dynamic Allocation A) 0.5% -0.5% 1.7%        
DWTFX (Arrow DWA Tactical A) 0.6% 15.5% 4.0% 12.3% 0.76    
BRAVX (Braver Tactical Opportunity N) -0.8% 2.8%          

**YTD: Year to Date

Year by year comparison >>

Cambria GTAA recovered nicely this year. Braver Tactical fund is another new fund worth monitoring. 

In MyPlanIQ TAA, we emphasize major asset classes, well balanced allocation and risk management, we believe the emphasis is a strong differentiation over the long run. 

Market Overview

Long bonds are doing well. Whether this signifies the upcoming weakness of stocks or not, we do not know. Stocks continue to hang on at a record high territory. Since now we are in May, a month that is weaker than average traditionally, we should not be complacent. 

For more detailed asset trend scores, please refer to 360° Market Overview.

We would like to remind our readers that markets are more precarious now than other times in the last 5 years. It is a good time and imperative to adjust to a risk level you are comfortable with right now.  However, recognizing our deficiency to predict the markets, we will stay on course. 

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. 

Latest Articles

Enjoy Newsletter

How can we improve this newsletter? Please take our survey 

–Thanks to those who have already contributed — we appreciate it.

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.