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 15, 2016. You can also find the re-balance calendar for 2016 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.

Strategic Asset Allocation & Lazy Portfolio Review

MyPlanIQ has maintained and monitored many  Strategic Asset Allocation (SAA) portfolios. In addition, we have also kept track of various lazy portfolios that were proposed by well known investors and brokerages. We have reviewed these portfolios in previous newsletters. See July 30, 2012: Strategic Asset Allocation & Lazy Portfolios Review, for example, for an earlier review and detailed description. 

As both stocks and bonds are now at historical high, we think it’s a good time to look at these portfolios again. 

Strategic & Lazy Portfolios

The following table shows the performance of several lazy portfolios and some of our SAA portfolios:

Portfolio Performance Comparison (as of 7/18/2016):
Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 10Yr AR From 12/31/2000
7Twelve Original Portfolio 9.4% 1.7% 3.5% 3.7% 5.2%  
P David Swensen Yale Individual Investor Portfolio Annual Rebalancing 10.3% 9.1% 9.7% 9.7% 8.1% 8.3%
Fund Advice Ultimate Buy and Hold Lazy Portfolio 5.0% 0.1% 2.6% 3.9% 4.9% 6.0%
The Coffee House Lazy Portfolio Index Funds 7.5% 4.7% 6.7% 7.9% 6.8% 7.1%
Harry Browne Permanent Portfolio 11.8% 9.9% 6.3% 5.3% 7.0% 6.8%
Wasik Nano 7.2% 5.3% 7.3% 7.6% 6.2%  
Six Core Asset Index Funds Strategic Asset Allocation – Optimal Moderate 6.9% 1.6% 3.9% 4.4% 5.7% 6.3%
Retirement Income ETFs Strategic Asset Allocation – Optimal Moderate 7.9% 5.1% 5.4% 5.9% 5.8% 5.2%*
VBINX (Vanguard Balanced Index Inv) 6.7% 4.3% 7.9% 9.0% 7.2% 6%

See year by year comparison >>

It should be noted that these portfolios do not have the same risk (stock) allocation. Some of them have higher stock allocations. For example, the Swensen portfolio allocates 70% to stocks and REITs while all MyPlanIQ’s portfolios here have 60% in stocks and other risk assets. 

These portfolios are mostly diversified in global stocks and bonds. From the above, one can see that other than Swensen portfolio, all portfolios have underperformed the simple 60% US stocks/40% US bonds VBINX (Vanguard Balanced Index Inv) benchmark for the last 5 and 10 years. This is mostly due to the strength of US stocks in the recent years. 

However, if we extend the period to more than 15 years (from 12/31/2000 when most of our portfolios have data), VBINX has lagged behind most of the portfolios. For our Retirement Income ETFs portfolio, the performance number since 12/31/2000 is not very meaningful as many of the ETFs didn’t exist at that time. 

What we can say is that global diversification is still a good concept, even at this time when US stocks have been the single best performer for the past 4-5 years now. 

Brokerage Suggested Portfolios

In addition, we also maintain several portfolios that were suggested by brokerages.  See the previous newsletter for more description on these portfolios. 

Portfolio Performance Comparison (as of 7/18/2016):
Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 10Yr AR 10Yr Sharpe
Schwab Managed ETF Portfolios Balanced with Growth 5.3% 0.5% 4.3% 5.1%    
Fidelity Managed Accounts Growth with Income 5.5% 1.9% 6.0% 7.0% 6.3% 0.5
Amerivest Guided Portfolio Growth 6.7% 3.4% 6.8% 7.6%    
VBINX (Vanguard Balanced Index Inv) 6.7% 4.3% 7.9% 9.0% 7.2% 0.54

See year by year comparison >>

These portfolios again are globally diversified and thus have done worse than VBINX. Among them, TD Ameritrade’s Amerivest portfolio has the best 5 year return, again because of its heavy allocation in US stocks and REITs (and no allocation in emerging market stocks). All these portfolios have more than 70% allocated in equities. 

Advisory Firms Suggested

The following table shows the suggestions given by Morningstar’s Ibbotson unit, Wealthfront and AssetBuilder, all of them are advisory firms. Again, please refer to the previous newsletter for more information on the portfolios’ construction. 

Portfolio Performance Comparison (as of 7/18/2016):
Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 10Yr AR 10Yr Sharpe
AssetBuilder Model Portfolio 09 5.5% -0.1% 2.3% 3.2% 4.3% 0.3
Wealthfront Moderate Portfolio 7.1% 2.1% 4.6% 4.8%    
Morningstar Ibbotson Balanced ETF Portfolio 6.7% 1.8% 5.0% 5.8%    

More latest detailed comparison>>

The AssetBuilder’s portfolio has been somewhat disappointing. It uses Dimensional Fund Advisors (DFA) funds that can be only accessed through a financial advisor. The portfolio, similar to 7Twelve Original Portfolio, allocates into many global assets evenly. This has hurt its performance. 

It should be noted that the Wealthfront portfolio was a portfolio suggested by Wealthfront in 2012. Since then, the firm has changed its allocation and has eliminated commodity exposure and increased allocation in REITs, both benefiting its recent portfolio performance. See Wealthfront Portfolio, for a risk profile 20 (80% allocated in equities) portfolio. 


We make the following observations

  • Portfolios that are overweight in US stocks have benefited. Similarly, exposure to long bonds (Swensen and Wealthfront new portfolio) has helped also. 
  • However, relatively, US stocks are way overvalued. Developed country stocks and emerging market stocks are more reasonably valued at this moment. We expect that in the next downturn, portfolios with more US stock exposure might get hit harder. However, given the current international economic and geopolitical situation, we are not very optimistic about these stocks in the intermediate term either. 
  • As what were discussed in June 27, 2016: Secular Cycles For Tactical And Strategic Investment Strategies and January 18, 2016: Strategic Asset Allocation: A Cautious Outlook, we believe that even a moderate or balanced stock and bond portfolio will have difficulty to generate a reasonable return in the coming decade as both stocks and bonds are at elevated high level. We believe investors should only invest their capital that will not be needed for at least 10 years (preferably more than 15 years) in these portfolios while putting the rest in a more tactical asset allocation or fixed income (bond) portfolio. 

Market Overview

Stocks rose almost daily last week in unchartered (all time high) territory. Long bonds and gold corrected somewhat last week. Emerging market stocks also showed considerable strength. However, we suspect that the ongoing Q2 earnings and other fundamental data will decide whether the up trend can sustain or not in the near future. We are more cautious than being optimistic at the moment. Regardless, we shall follow our strategies systematically to stay on course. 

For more detailed asset trend scores, please refer to 360° Market Overview

We would like to remind our readers that since the financial crisis in 2008-2009, we have not seen substantial structural change in the U.S., European and emerging market economies. Economies have heavily relied on low interest debts. Capital might be misallocated to unproductive investments and consumption. U.S. stock valuation is at a historically high level. It is thus not a good time to take excessive risk. However, we remain optimistic on U.S. economy in the long term and believe much better investment opportunities will arise in the future. 

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. 

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