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, August 11, 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.

Stock Musings

As stocks are now at all time high territory persistently, we are seeing investors are becoming more and more attracted to stock markets. Along with this trend, we have observed some ‘irrational’ behaviors or arguments. Here are some examples:

Here is what we would like to respond: 

However, if you are only reading articles or claims like this at this moment when the stock markets are highly overvalued, chances are that your long term period will need to be extended by another 5 or even 10 years, if you decide to get into the markets only right now. For example, for people who invested in S&P 500 in August 2000, for almost 14 years up to today on 7/28/2014, their annualized return is just about 3.8%! If an investor invested in S&P 500 in October 2007, the annualized return would be 5.7%, for almost 7 years. These two periods happen to the two peaks of S&P 500: 


At the moment, based on various valuation metrics, S&P 500 is expected to deliver less than 2% annual return (for example, see Hussman’s July 7, 2014 – Quotes on a Screen and Blotches of Ink). Even though no one can predict a top, it is hard to believe that stocks will never correct back to a point lower than today’s level at some time in the future. 
We also encourage readers to read our previous newsletter May 12, 2014: How To Handle An Elevated Overvalued Market on a proper way to step into this kind of markets. 
  • Regarding whether there is a need to use a diversified portfolio instead of just investing in US stocks and bonds, let’s look at the following chart: 

It is clear that in all other periods, VBINX  had under performed the portfolio until July 2013!

  • Regarding “much ado about nothing” on our tactical portfolios, we believe that anyone who would like to use tactical should recognize that the out performance and risk reduction a tactical portfolio delivers (see the following chart) come with a price: more frequent (we estimate on average, one needs to perform 4 to 5 times rebalances a year, even for a tactical portfolio with monthly rebalance schedule). We suggest our previous newsletter July 22, 2013: Tactical Asset Allocation: The Good, The Bad And The Ugly.

The takeaway: 

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