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 31, 2015. You can also find the re-balance calendar for 2014 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.
Slippery Asset Trends
Now that we are officially in August, the last month of summer, it is a good time to look at asset trends. First, here is the major asset class rankings using index ETFs:
Major Asset Classes Trend
07/31/2015
Description | Symbol | 1 Week | 4 Weeks | 13 Weeks | 26 Weeks | 52 Weeks | Trend Score |
---|---|---|---|---|---|---|---|
US Stocks | VTI | 1.19% | 1.17% | 0.37% | 6.52% | 11.47% | 4.15% |
US Equity REITs | VNQ | 1.19% | 3.8% | -0.23% | -7.25% | 9.89% | 1.48% |
International Developed Stks | VEA | 1.39% | 0.55% | -2.36% | 7.25% | 0.09% | 1.38% |
Intermediate Treasuries | IEF | 0.6% | 1.69% | 0.0% | -2.8% | 4.63% | 0.83% |
Total US Bonds | BND | 0.32% | 0.88% | -0.44% | -1.85% | 2.11% | 0.2% |
Treasury Bills | SHV | -0.02% | -0.02% | 0.0% | 0.01% | 0.0% | -0.01% |
Emerging Market Stks | VWO | -0.18% | -6.7% | -12.41% | -2.99% | -10.59% | -6.57% |
Commodities | DBC | -2.54% | -11.38% | -13.9% | -9.6% | -37.38% | -14.96% |
However, looking at the return charts of these major assets, one can see different pictures:
US Stocks (SPY)
US stocks have performed best. However, S&P 500 has been range bound since February with its 200 day moving average closing in within this range. Even without technical analysis jargon, one can easily see that such a situation will soon to be resolved, either up or down out of the range.
International Stocks (EFA)
European stocks have performed well in Euro currency. However, as US dollar has strengthened considerably so far this year, dollar denominated funds have fared worse. Greek debt resolution also played a large role in the big fluctuation of these stocks.
Emerging Market Stocks (EEM)
Emerging market stocks continue their slippery descent: these economies have been largely affected by the considerable weakness of Chinese and Russian economies. The hope of recovery before May this year has been dashed and now they are at the lowest level in the last 52 weeks.
US REITs (IYR)
REITs are highly sensitive to interest rates and investors have dumped the stocks since their high in March. It recently recovered from its low, again because now interest rate scare has subsided.
Long Term Bonds (TLH)
Recent ascent of long term bonds has been based on weak economic growth (GDP) and a not robust enough job market (too many temporary workers, stalled wage growth and record low participation rate). Apparently markets are adjusting to the effect of upcoming interest rise.
To summarize, other than US stocks, other risk assets are under their 200 days moving averages. It is frustrating to see that these assets whipsawed in some big ranges, creating enough false trends that have driven our Tactical Asset Allocation(TAA) based portfolios crazy.
We have encountered such slippery trends many times for the past five years. They represent a fear based rally: investors are more bearish and are always close to an exit door. However, the economies and financial markets have been constantly propped up by central banks, resulting more frequent fluctuation.
In a word, the asset trends are slippery. Ride on them cautiously.
Portfolio Review
Our balanced composite portfolio My Alternative Hedge Fund uses MyPlanIQ portfolios and some of our favorite balanced funds, permanent portfolio fund, risk parity and conservative funds. Its target allocation is as follows. The allocation and funds are not strict: one can substitute these portfolios and funds with their favorite ones and tweak the allocation based on personal risk preference. For example, the TAA portfolio can be substituted with other TAA portfolios using brokerage specific core funds mentioned in June 29, 2015: Core ETF Commission Free Portfolios or March 30, 2015: Brokerage Specific Core Mutual Fund Portfolios 2.
See December 2, 2013: Versatile Multiple Portfolio Construction for more details:
Asset | Fund in this portfolio | Percentage |
---|---|---|
stocks | P_51098 (MyPlanIQ Diversified Core Allocation ETF Plan Tactical Asset Allocation Most Aggressive) | 42% |
bonds | P_46880 (Schwab Total Return Bond) | 28% |
balanced | PRWCX (T. Rowe Price Capital Appreciation) | 10% |
permanent | PRPFX (Permanent Portfolio) | 10% |
risk_parity | ABRRX (Invesco Balanced-Risk Allc R) | 5% |
conservative | BERIX (Berwyn Income) | 5% |
Compared with some of our favorite global allocation funds (see SmartMoneyIQ Managers), this portfolio continues to perform in a steady fashion:
Portfolio Performance Comparison (as of 7/31/2015):
Ticker/Portfolio Name | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 5Yr Sharpe | 10Yr AR |
---|---|---|---|---|---|---|
My Alternative Hedge Fund | 0.1% | -1.8% | 7.1% | 7.9% | 1.06 | |
MALOX (BlackRock Global Allocation Instl) | 2.4% | 1.8% | 8.1% | 7.1% | 0.74 | 7.4% |
GBMFX (GMO Benchmark-Free Allocation III) | -1.7% | -3.6% | 4.9% | 6.1% | 0.9 | 6.8% |
PASDX (PIMCO All Asset D) | -1.8% | -6.9% | 1.9% | 3.9% | 0.74 | 4.5% |
EAXFX (Wells Fargo Advantage Asset Alloc R) | 0.1% | -3.7% | 5.4% | 6.0% | 0.68 | 4.6% |
WASYX (Ivy Asset Strategy Y) | -0.5% | -3.9% | 9.3% | 7.8% | 0.5 | 9.5% |
See detailed year by year comparison >>
Because the risk managed tactical portfolios and uncorrelated strategies performed by several funds and portfolios, we believe this ‘hedge’ style portfolio will withstand market stresses better than many conventional funds. For a balanced or conservative investor, it is a good way to construct similar portfolios.
Market Overview
It looks like investors are more convinced that interest rates will rise more gradually than previously thought. Yield sensitive assets such as long term Treasury bonds (such as TLH or TLT) and REITs (such as VNQ or IYR) have crept back up. Mr. Market continues to play with a guessing game. As stated in the above, we advise a cautious allocation.
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
- July 27, 2015: Performance Dispersion Among Momentum Based Portfolios
- July 20, 2015: Global Balanced Portfolio Benchmarks
- July 13, 2015: Pain in Tactical Portfolios
- July 6, 2015: Fixed Income Total Return Bond Funds In Strategic Asset Allocation Portfolios
- June 29, 2015: Core ETF Commission Free Portfolios
- June 22, 2015: Secular Asset Trends
- June 15, 2015: Giving Up Bonds?
- June 1, 2015: Summer Blues?
- May 26, 2015: Cash, Bonds and Stocks In A Rising Rate Environment
- May 18, 2015: Portfolio Update
- May 11, 2015: Pain in Fixed Income?
- May 4, 2015: The Balanced Stock and Long Term Treasury Bond Portfolios
- April 27, 2015: Long Term Treasury Bond Behavior
- April 20, 2015: 529 College Savings Plan Rebalance Policy Change
- April 13, 2015: Total Return Bond Funds As Smart Cash
- April 6, 2015: The Low Return Environment
- March 30, 2015: Brokerage Specific Core Mutual Fund Portfolios 2
- March 23, 2015: Investment Arithmetic for Long Term Investments
- March 16, 2015: Brokerage Specific Core Mutual Fund Portfolios
- March 9, 2015: Newsletter Collection Update
- March 2, 2015: Total Return Bond ETFs
- February 23, 2015: Why Is Global Tactical Asset Allocation Not Popular?
- February 16, 2015: Where Are Permanent Portfolios Going?
- February 9, 2015: How Have Asset Allocation Funds Done?
- February 2, 2015: Risk Management Everywhere
- January 26, 2015: Composite Portfolios Review
- January 19, 2015: Fixed Income Investing Review
- January 12, 2015: How Does Trend Following Tactical Asset Allocation Strategy Deliver Returns
- January 5, 2015: When Forecast Fails
- December 22, 2014: Long Term Asset Returns: How Long Is Long?
- December 15, 2014: Beaten Down Assets
- December 8, 2014: Implementing Core Asset Portfolios In a Brokerage
- December 1, 2014: Two Key Issues of Investment Strategies
- November 24, 2014: Holiday Readings
- November 17, 2014: Retirement Spending Portfolios Update
- November 10, 2014: Fixed Income Or Cash
- November 3, 2014: Asset Trend Review
- October 27, 2014: Investment Loss, Mistakes And Market Cycles
- October 20, 2014: Strategic Portfolios With Managed Volatility
- October 13, 2014: Embrace Volatility
- October 6, 2014: Tips For 401k Open Enrollment
- September 29, 2014: What Can We Learn From Bill Gross’ Departure From PIMCO?
- September 22, 2014: Why Total Return Bond Funds?
- September 15, 2014: Equity And Total Return Bond Fund Composite Portfolios
- September 8, 2014: Momentum Based Portfolios Review
- September 1, 2014: Risk & Diversification: Mint.com Interview
- August 25, 2014: Remember Risk
- August 18, 2014: Consistency, The Most Important Edge In Investing: Tactical Case
- August 11, 2014: What To Do In Overvalued Stock Markets
- August 4, 2014: Is This The Peak Or Correction?
- July 28, 2014: Stock Musings
- July 21, 2014: Permanent Portfolios & Four Pillar Foundation Based Framework
- July 14, 2014: Composite Portfolios Review
- July 7, 2014: Portfolio Behavior During Market Corrections
- June 30, 2014: Half Year Brokerage ETF and Mutual Fund Portfolios Review
- June 23, 2014: Newsletter Collection Update
- June 16, 2014: There Are Always Lottery Winners
- June 9, 2014: The Arithmetic of Investment Mistakes
- June 2, 2014: Tips On Portfolio Rebalance
- May 26, 2014: In Praise Of Low Cost Core Asset Class Based Portfolios
- May 19, 2014: Consistency, The Most Important Edge In Investing: Strategic Case
- May 12, 2014: How To Handle An Elevated Overvalued Market
- May 5, 2014: Asset Allocation Funds Review
- April 28, 2014: Now The Economy Backs To The ‘Old Normal’, Should Our Investments Too?
- April 21, 2014: Total Return Bond Investing In The Current Market Environment
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