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, May 2, 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.

Construction of Sound And Conservative Portfolios

In the past, we have pointed out that a portfolio that has conservative allocation usually commands best risk adjusted return or Sharpe ratio. A conservative allocation usually allocates around 20-30% to stocks. For example, VWINX (Vanguard Wellesley Income Inv) had about 30% allocated to US stocks and 7% allocated to Non US stocks on 12/31/2015. 

If you are a conservative investor or just a retiree, you might not have much choice but going for a conservative allocation. However, even if you are an investor who can tolerate more risk, you might want to consider a conservative portfolio because of the following reasons:

  • You might not want to take more risk since stock markets are at a high valuation level. For example, at this moment, using a long term stock market valuation metric such as Shiller’s CAPE 10 or Buffett’s total market capitalization over gross domestic or national product (see Market Indicators for more details), stocks are at a historical high level and overvalued by over 40%. John Hussman has frequently discussed this subject. Based on his modified Buffet valuation metric, he estimated that S&P 500 will return around 2% annually for the coming 12 years (see his latest weekly commentary). A risk averse investor might want to reduce stock exposure in such market conditions. However, as stock markets can be at a high overvalued level for a long time and it is hard to predict their behavior, one might not want to totally abandon stocks even at such a high level. A conservative allocation is thus a good portfolio to be with in this type of situations. 
  • A conservative portfolio not only provides the best risk adjusted return, it actually can deliver better returns when markets are at a late stage bull market or have been mostly at high valuation levels for a long period of time. For example, in the following table, a conservative portfolio or fund has had a better 10 year return than a stock index such as S&P 500 total return index. Simply put, it doesn’t pay to take excessive risk when markets are frothy. So a conservative portfolio can be a good anchor to wait it out without losing much return opportunity. 

Conservative allocation mutual funds

There are several ways to invest in a conservative portfolio. One way is to invest in a mutual fund. There are several excellent conservative allocation funds one can consider. The following table shows some of them: 

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