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):
|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|
|PRWCX (T. Rowe Price Capital Appreciation)||3.1%||6.9%||13.7%||14.0%||8.6%||0.56|
|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):
|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):
|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.
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.
- August 17, 2015: ETF or Mutual Fund Based Portfolios
- August 10, 2015: Updated Newsletter Collection
- August 3, 2015: Slippery Asset Trends
- 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
How can we improve this newsletter? Please take our survey
–Thanks to those who have already contributed — we appreciate it.