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.
Better Email Communication
It has come to our attention that several users have communicated with us by simply replying to our newsletter emails, performance report emails or signup emails. In general, all of these emails are sent from either support at myplaniq.com or newsletter at myplaniq.com. These emails can be easily overlooked as they are usually buried in our backup system. To better serve you, we would like to ask you to email us with a new subject line instead of a reply. Thank you for understanding.
Diversification And Global Allocation
Diversification has clearly encountered some problems for the past several years. First in 2013, gold and commodities started to weaken. Emerging market stocks followed the lead. Since 2014, everything other than US stocks and REITs have lost money:
| Index Fund | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR |
|---|---|---|---|---|---|
| SPY (SPDR S&P 500 ETF) | 3.5% | 3.0% | 16.4% | 13.6% | 7.3% |
| EFA (iShares MSCI EAFE) | 1.7% | -2.1% | 6.4% | 4.3% | 3.4% |
| EEM (iShares MSCI Emerging Markets) | -13.1% | -15.5% | -5.0% | -4.5% | 3.6% |
| IYR (iShares US Real Estate) | -0.0% | 0.8% | 9.6% | 10.3% | 5.6% |
| GLD (SPDR Gold Shares) | -8.4% | -10.2% | -14.2% | -5.5% | 7.5% |
| AGG (iShares Core US Aggregate Bond) | 0.5% | 0.9% | 1.3% | 3.1% | 4.4% |
Looking at all country stock performance (see 360° Market Overview), one can see this pattern has continued:
Global Stocks Trend
12/07/2015
| Description | Symbol | 1 Week | 4 Weeks | 13 Weeks | 26 Weeks | 52 Weeks | Trend Score |
|---|---|---|---|---|---|---|---|
| Belgium | EWK | 1.29% | 2.97% | 8.5% | 2.29% | 10.15% | 5.04% |
| Japan | EWJ | 0.08% | 0.32% | 7.83% | -3.39% | 8.35% | 2.64% |
| Austria | EWO | 1.3% | -0.41% | 6.16% | -3.71% | 0.55% | 0.78% |
| Germany | EWG | -0.95% | 1.93% | 5.51% | -4.63% | -3.82% | -0.39% |
| France | EWQ | -0.48% | -1.53% | 3.64% | -4.41% | -0.92% | -0.74% |
| Hong Kong | EWH | 0.9% | -0.54% | 8.98% | -12.65% | -1.59% | -0.98% |
| The Netherlands | EWN | -1.13% | -1.58% | 2.95% | -5.4% | 0.05% | -1.02% |
| Italy | EWI | -0.49% | -0.35% | 0.0% | -4.63% | -0.11% | -1.11% |
| Switzerland | EWL | 1.49% | 0.16% | 1.03% | -7.97% | -2.32% | -1.52% |
| Australia | EWA | -0.42% | 4.68% | 8.38% | -9.77% | -13.27% | -2.08% |
| South Korea | EWY | -3.26% | -3.73% | 10.65% | -8.55% | -8.67% | -2.71% |
| United Kingdom | EWU | -2.1% | -1.29% | 2.87% | -9.04% | -7.69% | -3.45% |
| Taiwan | EWT | 0.52% | -2.02% | 4.94% | -12.54% | -10.92% | -4.01% |
| Malaysia | EWM | -0.66% | 3.74% | 9.23% | -14.18% | -19.9% | -4.35% |
| Singapore | EWS | 1.33% | -1.66% | 3.8% | -14.15% | -15.56% | -5.25% |
| Spain | EWP | -0.16% | -1.65% | 0.3% | -10.95% | -16.83% | -5.86% |
| Mexico | EWW | -3.56% | -3.53% | 0.84% | -9.23% | -13.86% | -5.87% |
| India | INP | -2.56% | -2.88% | -1.25% | -8.19% | -15.34% | -6.04% |
| China | FXI | -1.74% | -3.59% | 9.59% | -25.14% | -10.14% | -6.2% |
| Russia | RSX | -7.19% | -7.08% | 0.65% | -13.56% | -8.18% | -7.07% |
| Canada | EWC | -4.13% | -4.7% | -4.54% | -17.8% | -20.03% | -10.24% |
| South Africa | EZA | -6.39% | -8.66% | -5.86% | -18.88% | -20.73% | -12.1% |
| Brazil | EWZ | 3.42% | -0.3% | 0.82% | -28.21% | -36.68% | -12.19% |
Other than the U.S., only 4 countries’ stocks haven’t lost money for the past 52 weeks.
Lazy Portfolios
As always, we are a fan of lazy portfolios: those that have target allocations among a set of diversified index funds. See July 30, 2012: Strategic Asset Allocation & Lazy Portfolios Review, for example.
The strength in the U.S. only certainly affects these diversified portfolios too:
Portfolio Performance Comparison (as of 12/7/2015):
| Ticker/Portfolio Name | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR | 10Yr Sharpe |
|---|---|---|---|---|---|---|
| 7Twelve Original Portfolio | -5.9% | -6.2% | 3.1% | 3.7% | 4.8% | 0.27 |
| P David Swensen Yale Individual Investor Portfolio Annual Rebalancing | 0.9% | 2.4% | 8.5% | 9.0% | 7.4% | 0.44 |
| P Ted Aronson Lazy Portfolio Annual Rebalancing | -2.5% | -3.2% | 6.5% | 6.1% | 6.3% | 0.33 |
| Fund Advice Ultimate Buy and Hold Lazy Portfolio | -1.9% | -3.0% | 3.3% | 4.2% | 4.9% | 0.33 |
| The Coffee House Lazy Portfolio ETFs | -0.1% | 0.2% | 7.8% | 7.5% | ||
| Harry Browne Permanent Portfolio | -3.1% | -3.0% | -0.3% | 3.4% | 5.9% | 0.7 |
| Wasik Nano | 1.3% | 1.5% | 7.4% | 7.9% | 6.0% | 0.39 |
| VBINX (Vanguard Balanced Index Inv) | 1.9% | 1.9% | 10.0% | 9.2% | 6.6% | 0.48 |
See detailed year by year performance >>
In fact, the more diversified, the more underperformance: 7Twelve Original Portfolio and Harry Browne Permanent Portfolio are the two good examples.
Notice also, other than David Swensen’s lazy portfolio, no portfolio has out performed the simple 60% US stocks and 40% US bonds Vanguard Balanced Index Fund VBINX for the past 3, 5 and 10 years. The past 2-3 years are definitely a period that show the diversification principle, advocated by many (including MyPlanIQ), has distracted the performance, instead of enhancing it.
The problem is also evident among many solid global allocation funds.
Lackluster Global Allocation Funds
On SmartMoneyIQ Managers page, we maintain some of solid and representative asset allocation funds.
Global Allocation Fund Performance Comparison (as of 12/7/2015):
| Fund | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR | 10Yr Sharpe |
|---|---|---|---|---|---|---|
| GBMFX (GMO Benchmark-Free Allocation III) | -3.5% | -4.8% | 3.3% | 4.6% | 6.0% | 0.66 |
| PASDX (PIMCO All Asset D) | -8.2% | -9.9% | -2.2% | 1.7% | 3.8% | 0.37 |
| WASYX (Ivy Asset Strategy Y) | -6.5% | -9.3% | 4.7% | 3.9% | 7.7% | 0.45 |
| GDAFX (Goldman Sachs Dynamic Allocation A) | -6.0% | -7.4% | 0.3% | 1.6% | ||
| SGIIX (First Eagle Global I) | 0.7% | -0.5% | 7.1% | 6.7% | 7.8% | 0.53 |
| MALOX (BlackRock Global Allocation Instl) | -0.1% | -1.6% | 6.0% | 4.9% | 6.5% | 0.51 |
| DMLIX (DoubleLine Multi-Asset Growth I) | -3.0% | -2.0% | 0.5% | |||
| VBINX (Vanguard Balanced Index Inv) | 1.9% | 1.9% | 10.0% | 9.2% | 6.6% | 0.48 |
Year to date, only SGIIX (First Eagle Global I) managed to stay positive. The stellar long term performer GBMFX (GMO Benchmark-Free Allocation III) has under performed VBINX for all 1, 3, 5, and 10 years period. PASDX (PIMCO All Asset D), another solid global allocation fund, has faltered for the past 3 years and going. This group is believed to be the best among hundreds of global allocation mutual funds. If their performance is such, one can imagine how bad the rest are.
Diversification is still the key
It is tempting to throw away the well established diversification methodology and go all in to the US assets. However, there are many reasons to argue against it:
- On the contrary, diversification actually works: precisely because of investments in the U.S. assets, these portfolios have weathered weakness in other assets. Even though from an US investor point of view, it would be better to just invest in the U.S., however, investors shouldn’t forget that before 2008, it was the emerging market and foreign stocks that carried global asset allocation portfolios to out perform the U.S. assets.
- Just as in 2013, no one can foresee the prolonged weakness and bear market in commodities and emerging market stocks, it is also very likely that in anytime the U.S. assets can suffer from a long period of under performance in the near future. No one can predict the future precisely, that is the very reason why we need diversification.
- Even though we believe the U.S. will still be one of the better places to invest in the coming several years, globalization is still here to stay. With the advent of easy communication, manufacturing goods infrastructure, efficient supply chains and transportation, globalization is the long term trend that will not change easily.
- If you want to stay on strong performing assets, you need to do so in a systemic way, instead of acting on a hunch. Using a trend following strategy such as Tactical Asset Allocation(TAA) can be a way to invest in high performing assets. However, the TAA does not come without an expense: in fact, recently, TAA has also under performed, mostly due to the distraction of other assets and the volatile market trends.
- Finally, no single strategy works all the time. Global allocation portfolios were in favor several years ago and now, they are weak. But do you want to abandon them? As a long term investor, one has to stick to selected investment plans for a long period of time.
Market Overview
We concur with Hussman that recent stock market fluctuation is a possible sign of top formation. Manufacturing weakness, stock sector divergence, fewer and fewer stocks rising, widening spread between high yield and credit or Treasury bonds and the overvalued markets are all setting up a fragile market that can behave violently, as evidenced by its recent gyration. Although markets seem to wait for the Fed’s interest rate decision next week, long term returns of major assets have been set regardless of the decision. We believe it is important to review one’s allocation and risk tolerance level at this time. It is also important to stick to a plan to navigate through such a period systematically.
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
- November 30, 2015: Investors and Speculators Combined
- November 23, 2015: Active Stock Fund Performance Consistency
- November 16, 2015: Permanent, Risk Parity And Alternative Portfolios Review
- November 9, 2015: Broad Base Core Mutual Fund Review
- November 2, 2015: Broad Base Index Core ETFs Review
- October 26, 2015: Total Return Bond Fund Review
- October 19, 2015: Advanced Portfolio Review
- October 12, 2015: What About Commodities?
- October 5, 2015: Core Satellite Portfolios In A 401k Account
- September 28, 2015: Risk Managed Strategic Asset Allocation Portfolios Revisited
- September 21, 2015: Quest For The Best Investment Strategy
- September 14, 2015: Core Satellite Portfolios In Market Turmoil
- September 7, 2015: Market Rout Creates An Opportunity to Reposition Your Portfolios
- August 31, 2015: Review of Asset Allocation Funds and Portfolios
- August 24, 2015: Market Rout And Your Portfolios
- 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
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Diversified Asset Allocation Portfolios For Your Plans
