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.

Review of Asset Allocation Funds and Portfolios

From time to time, we review a selected group of tactical asset allocation funds and portfolios. A previous review can be found in May 5, 2014: Asset Allocation Funds Review.  As we are at the end of August, it is a good time to look at these funds and portfolios again. 

Balanced and world allocation funds review

The following table lists the group of  both U.S. centric balanced funds and world allocation funds. Most of these funds can be found on SmartMoneyIQ Managers page.  

Portfolio Performance Comparison (as of 8/31/2015):

Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 10Yr AR 10Yr Sharpe
Six Core Asset ETFs Tactical Asset Allocation Moderate -4.7% -7.4% 4.2% 5.6% 9.3% 0.84
HSGFX (Hussman Strategic Growth) -1.0% -6.0% -5.9% -7.2% -2.9% -0.46
FPACX (FPA Crescent) -3.0% -2.0% 7.8% 9.1% 6.9% 0.6
MNBAX (Manning & Napier Pro-Blend Extnd Term S) -3.6% -6.5% 6.9% 8.0% 5.8% 0.38
SVBIX (JHancock Balanced I) -2.0% -1.0% 9.4% 10.0% 8.3% 0.59
GRSPX (Greenspring) -5.5% -8.9% 4.3% 5.1% 5.1% 0.39
PRWCX (T. Rowe Price Capital Appreciation) 3.1% 6.9% 13.7% 14.0% 8.6% 0.56
BRUFX (Bruce) 3.1% 0.1% 12.7% 12.4% 7.7% 0.66
VBINX (Vanguard Balanced Index Inv) -1.0% 1.5% 9.3% 10.9% 6.6% 0.5
GBMFX (GMO Benchmark-Free Allocation III) -2.9% -5.5% 4.0% 6.0% 6.6% 0.76
PASDX (PIMCO All Asset D) -5.8% -11.8% -0.0% 2.9% 4.0% 0.45
PGMAX (PIMCO Global Multi-Asset A) -0.4% -1.6% 0.0% 2.7%    
WASYX (Ivy Asset Strategy Y) -8.1% -12.1% 5.2% 6.3% 8.6% 0.55
SGIIX (First Eagle Global I) -1.8% -4.5% 6.8% 9.2% 8.1% 0.58
MALOX (BlackRock Global Allocation Instl) -0.4% -2.5% 6.5% 6.9% 7.0% 0.55
DMLIX (DoubleLine Multi-Asset Growth I) -2.9% -1.3% 1.1%      
EAXFX (Wells Fargo Advantage Asset Alloc R) -3.9% -7.2% 3.4% 5.3% 4.2% 0.33

Year by year detailed comparison >>

As a reference, we compare these funds with our Six Core Asset ETFs Tactical Asset Allocation Moderate. The highlighted ones are world allocation funds. 

Year to date, the two U.S. centric balanced funds PRWCX (T. Rowe Price Capital Appreciation) and BRUFX (Bruce) stand out: both still have positive returns. These two funds have consistently done well in the past (as reviewed in our 2014 newsletter). For those who are interested in balanced mutual funds, we suggest you to pay attention to these two funds. They exhibit many virtues in investing: consistency in strategies (PRWCX uses Growth At A Reasonable Price stock investing strategy while BRUFX uses absolute value strategy), balanced risk allocation and smart use of fixed income (bonds). 

Unfortunately, many of these funds can still incur large drawdown at a distressed market such as that in 2008. However, as long as investors are aware of the risk and allocate properly, these funds can have a place in one’s portfolios. 

If current stock market stress continues, we expect HSGFX (Hussman Strategic Growth) will turn a corner and excel again. 

Risk parity, permanent portfolios and hedge portfolio

Another type of funds or portfolios are more unconventional. They are not widely employed by individual investors. However, we continue to believe these portfolios will deliver value in the current investment environment. As both long bonds and gold have encountered recent weakness, it is interesting to see how these portfolios or funds have fared: 

Portfolio Performance Comparison (as of 8/31/2015):

Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 5Yr Sharpe 10Yr AR
My Alternative Hedge Fund -2.1% -5.8% 5.9% 7.5% 1.02  
Harry Browne Permanent Portfolio -3.1% -3.5% -0.4% 4.2% 0.68 6.3%
Permanent Income Portfolio -1.8% 0.4% 3.2% 6.2% 1.26 5.8%
Bridgewater All Weather Portfolio Risk Parity -0.4% -1.5% 1.0% 4.0% 1.17 5.4%
PRPFX (Permanent Portfolio) -4.5% -9.7% -1.8% 2.8% 0.32 5.9%
ABRRX (Invesco Balanced-Risk Allc R) -3.7% -5.6% 1.6% 5.6% 0.99  
AQRNX (AQR Risk Parity N) -5.5% -10.0% 1.5%      

See year by year detailed comparison >>

We make the following comments:

  • Risk parity: these funds and portfolios have more weight in (long) bonds. Because of the recent weakness in stocks, rate increase might be on hold, resulting in better performance in fixed income. However, we caution that there is no guarantee that stocks and long bonds are negatively correlated (or when stocks decline, (long) bonds will rise). For example, it has been reported that China has sold bulk of U.S. treasury bonds to stabilize its currency. This happened amid the current stock decline, which resulted in somewhat muted long bond performance. 
  • Permanent portfolios: these portfolios have not performed well because of somewhat weak long bonds and gold. Our Permanent Income Portfolio has done better because of its use of inflation protected bonds in lieu of gold. 
  • My Alternative Hedge Fund: we are comfortable with this type of portfolios: it uses a blend of conventional balanced funds, permanent portfolio, risk parity fund as well as tactical allocation portfolio and tactical total return bond investment. In fact, this portfolio has the best 5 year return and a very reasonable 7.4% standard deviation. 

Tactical allocation funds 

The following is a list of funds that we use to compare with MyPlanIQ Tactical Asset Allocation (TAA) strategy based portfolios, such as 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 comparison (as of 8/31/2015):

Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 3Yr Sharpe 5Yr AR 10Yr AR
Six Core Asset ETFs Tactical Asset Allocation Moderate -4.7% -7.4% 4.2% 0.61 5.6% 9.3%
GTAA (AdvisorShares Morg Crk Glbl Tacticl ETF) -7.0% -8.7% 0.2% 0.2    
GMOM (Cambria Global Momentum ETF) -5.7%          
GDAFX (Goldman Sachs Dynamic Allocation A) -5.5% -7.3% 1.0% 0.34 2.9%  
DWTFX (Arrow DWA Tactical A) -4.7% -1.5% 8.9% 0.92 8.0%  
BRAVX (Braver Tactical Opportunity N) -7.3% -7.9% 1.1% 0.15    
GHUAX (Good Harbor Tactical Core US A) -4.4% -12.3%        
CLTCX (Catalyst/Lyons Tactical Allocation C) -7.0% -1.8% 13.0% 1.27    


See year by year detailed comparison >>

Unfortunately, most of these funds have only a short history. Year to date, our Six Core portfolio has performed very well, among these funds. We should also point out that DWTFX (Arrow DWA Tactical A)GHUAX (Good Harbor Tactical Core US A)CLTCX (Catalyst/Lyons Tactical Allocation C) can invest up to 100% in stocks, thus, they are comparable with our most aggressive (risk profile 0) tactical portfolios.

Because most funds were recently introduced before 2009, it is interesting to see how they cope with the current (or future) weakness, especially for the next bear market. 

Market Overview

Stock markets went through a reflexive rebound last week. However, whether such rebound can sustain to make current decline as a short blip or not is still to be seen. At the most, it is possible that stocks will continue to experience a stretched period of weakness as current global economy and financial markets are still under stress. Again, we emphasize paring down risk exposure: for a strategic portfolio, you should reduce risk exposure to a level you are comfortable with (see our previous newsletter); for a tactical portfolio, it is time to further trim down risk. 

Current market condition also presents a trickier situation than even 2008: bonds are not necessarily hedge when stocks decline, considering the prolonged low interest rate environment we have been. However, regardless of what our hunches are, the best way is still to stick to our preset investing plan. 

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. 

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