Re-balance Cycle Reminder All MyPlanIQ’s newsletters are archived here.

For regular SAA and TAA portfolios, the next re-balance will be on Tuesday, January 19, 2016. 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.

Review Of Trend Following Tactical Asset Allocation

By now, it is clear that our  Tactical Asset Allocation(TAA) had a very lousy year in 2015. In fact, as shown in our previous newsletter January 4, 2016: What Worked And Didn’t In 2015, 2015 is the worst year since 1990s.

We have regularly analyzed the long term performance of trend following tactical asset allocation strategy which is what our TAA is based on. The following are some recent newsletters: 

In this newsletter, we will update our long term TAA performance data and chart by including 2015 figures. 

Tactical Asset Allocation Long Term Performance

Our long term performance data use our benchmark portfolio  P Relative Strength Trend Following Six Assets.  The following is its description:


This portfolio solely serves for benchmark purpose because of the longevity of historical data of the funds used in this portfolio. It diversifies international stock investments based on geographical regions instead of economic groups (i.e. international developed and emerging markets). We prefer using economic group diversification over this portfolio in real life. For a better diverisification portfolio, please see P Goldman Sachs Global Tactical Include Emerging Market Diversified Bonds.

Inception date: 6/28/1991. 

This portfolio uses mutual funds with longest price history. The international and emerging market and REITs are the ones with shorter history.

Funds used in this portfolio:

  • U.S. stocks: Vanguard 500 Index (VFINX), inception:3/27/1987
  • European stocks: Vanguard European (VEURX), inception: 11/1/1990
  • Pacific stocks: Vanguard Pacific (VPACX), inception: 11/1/1990
  • US REITs: Vanguard REITs (VGSIX), inception: 6/28/1996
  • Gold: GLD, inception:1/4/1971. Before ETF GLD’s inception on 11/18/2004, we use London spot gold price (monthly closing). 
  • US Bonds: Vanguard Total Bond Index (VBMFX), inception: 6/4/1990
  • CASH: calculated using 3 month T-Bill interest. 

We want to emphasize this portfolio is solely used for benchmark purpose. We prefer using P Goldman Sachs Global Tactical Include Emerging Market Diversified Bonds or our other basic TAA portfolios instead in real investments. 

The following table and charts show the year over year and rolling 5 year performance, compared with S&P 500 total return (using Vanguard VFINX as the proxy):

Name 2015 1Yr

Since 6/28/91


Since 6/28/91

Max. DD

P Relative Strength Trend Following Six Assets -8.0% -14.2% 4.5% 5.2% 7.5% 9.9% 17.3%
VFINX (Vanguard (S&P 500) Index) 1.3% -4.0% 11.8% 10.8% 6.3% 9% 55.3%

Note: Max. DD: Maximum Drawdown. data as of 01/11/2015

Because of the -8% loss in 2015, the portfolio’s rolling 5 year return is reduced to 6.2% in 2015 (i.e. the compound annual return of 5 years 2015, 2014, 2013, 2012 and 2011).  

Sources of Underperformance: Whipsaw, Low Return Environment in 2015

The portfolio’s worst underperformance in 2015 was mainly caused by a whipsaw and low return environment: 

Candidate Fund Performance Comparison (as of 1/11/2015):

Fund 2015 Return 1Yr AR 3Yr AR 5Yr AR 10Yr AR 10Yr Sharpe
VFINX (Vanguard 500 Index Investor) 1.3% -4.0% 11.8% 10.8% 6.3% 0.26
VEURX (Vanguard European Stock Index Inv) -2.0% -6.3% 1.8% 3.1% 2.3% 0.06
VPACX (Vanguard Pacific Stock Index Inv) 2.2% -4.2% 2.5% 1.4% 1.0% 0.01
VGSIX (Vanguard REIT Index Inv) 0.8% -5.4% 9.6% 11.4% 6.8% 0.16
GLD (SPDR Gold Shares) -10.7% -8.8% -13.0% -4.6% 7.0% 0.3
VBMFX (Vanguard Total Bond Market Index Inv) 0% 0.4% 1.6% 3.2% 4.4% 0.91

Not a single candidate fund in this portfolio achieved more than 5% return last year. Furthermore, other than GLD, all the other assets’ returns are clustered around 0, which indicates a trendless whipsaw market. Such a market is usually unkind to a trend following strategy. 

In fact, this is one of the only 4 years since 1970s when no asset among stocks, REITs, gold and 10 year Treasury bonds had a more than 10% return: 


For the performance of other years since 1970, please see January 12, 2015: How Does Trend Following Tactical Asset Allocation Strategy Deliver Returns.

This is also true when we look at international developed market stocks and emerging market stocks: 

We can also look into the portfolio’s behavior during 2015 in a close up fashion. However, the most compelling reason for this type of strategies is due to low positive returns and negative returns for all of the candidate assets. Notice if all assets other than cash or bonds have large negative returns, the strategy can still perform well as it will remain in bonds or cash in a still very trendy (down trend) market, albeit it will achieve a low positive return. 


The TAA’s performance in 2015 shows that the strategy is not immune to meaningful loss. Although we are disappointed by the under performance, we are confident that the strategy will eventually turn the corner. Our confidence stems from the strong intuition behind the strategy, the simplicity of the strategy and its long term performance record. We refer our anxious readers to the following newsletters: 

Near term, we make the following observations: 

  • Stocks are still at elevated over valued levels. Before they undergo big corrections, it is increasingly hard to derive returns. Furthermore, interest rates of bonds are still extremely low, thus limiting the returns of this asset too. The only black horse is commodities or gold. Unfortunately, no one knows when they will hit bottom (though they have lost a lot and that is why they are more attractive). 
  • It is thus possible that the portfolio might still have lower returns in the coming years, though that might not be as bad as buy and hold portfolios that might suffer from large negative loss. 
  • However, since no one can predict precisely what will happen in 2016 or beyond, one has to stick to strategies that have been well planed out. 
  • The key for 2016 is to preserve capital as there are not many attractive assets for both Strategic Asset Allocation (SAA) and TAA strategies.  

Market Overview

Risk asset trends continue to be negative. Investors should be aware that a bear market is a process, not a straight line decline. At the moment, we are no where close to a typical bear market which typically would incur 20%-40% loss. If a bear market indeed becomes materialized, it will go through several up and down phases in a generally downward trend. It is still not too late to properly align your risk level to somewhere you are comfortable with. 

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

Enjoy Newsletter

How can we improve this newsletter? Please take our survey 

–Thanks to those who have already contributed — we appreciate it.

Any investment in securities including mutual funds, ETFs, closed end funds, stocks and any other securities could lose money over any period of time. All investments involve risk. Losses may exceed the principal invested. Past performance is not an indicator of future performance. There is no guarantee for future results in your investment and any other actions based on the information provided on the website including, but not limited to, strategies, portfolios, articles, performance data and results of any tools. All rights are reserved and enforced. By accessing the website, you agree not to copy and redistribute the information provided herein without the explicit consent from MyPlanIQ.