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, December 14, 2015. You can also find the re-balance calendar for 2015 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.

Investors and Speculators Combined

It is a well known fact that investors would like to be a true investor: someone who buys and holds an investment based on its fundamental. It will only sell such an investment when its fundamental has changed substantially or when the investment becomes way more expensive. Warren Buffett perhaps is one of the most well known investors in this category. However, other than a few (and most of them are institutional investors who manage assets that have their perpetual purpose such as a university endowment), most average investors don’t  have a luxury or patience to wait it out when investments become  expensive. For example, our P Shiller Cyclically Adjusted PE 10 SO SU Stock Market Timing Strategy Weekly Total Return Bond Funds As Cash listed on Advanced Strategies can go into ‘cash’ for a long time when a long term stock market valuation Shiller Cyclically Adjusted PE (CAPE) becomes over valued. In this portfolio, we mitigate this idle ‘cash’ holding issue by investing in a total return bond portfolio instead. 

However, even with such an approach, investors can still be out of stock markets for years, if it is not months. For many, this could test their real patience. To make the matter worse, when you are out of stock markets for a long time, stocks can defy the conventional wisdom and keep rising for a long time until it becomes a bubble that eventually bursts. It is certainly excruciating that in those years, you see stocks run up double digits every year. 

Certainly, one can adopt the core satellite investment approach we advocate by always allocating a portion of capital in a core strategic buy and hold portfolio and the rest into a tactical or long term valuation based timing portfolio (the satellite). By doing so, you will not be out of stock markets even when markets are expensive. But doing so leads to another issue: how much should one allocate to the ‘core’? Allocating too much could lead to a big portfolio drawdown or loss when markets experience a severe downturn such as those in 2001-2002 and 2008-2009, not to mention a lower return in subsequent years when markets are highly overvalued (such as right now, based on Hussman, GMO and many others, average stock market returns in the coming seven years or longer will be either negative or close to zero). On the other hand, allocating too little to the core would result in a period of under performance from the timing or tactical portfolio in later years of a bull market that can last several years. 

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