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, October 24, 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.

Fixed Income Investing: Actively Managed Funds vs. Index Funds

We continue our miniseries on active funds vs. index funds. In the previous newsletter September 19, 2016: Stock Investing: Actively Managed Funds vs. Index Funds, we discussed the rationale behind our preference of low cost index stock funds over active stock funds. In this newsletter, we look at fixed income funds. 

Unlike in stock investing, in principle, we prefer using a selected list of actively managed fixed income bond funds instead of bond index funds. However, that does not mean we like any actively managed bond funds. In fact, there are only handful of bond funds that qualify as our candidate funds. 

Capitalization weighting in a bond index fund is questionable

The very first objection to invest in a bond index fund is that it does not present an intuitive sense to use market value (capitalization) to decide how much an index fund should invest. For example, if a company borrows more, its bonds will have bigger capitalization, thus, its bigger weights in an index fund. Similarly, if government issues more debts, its bonds get more weight. This is exactly what has happened lately as the prices of U.S. Treasury bonds have risen so much. Even John Bogle, the champion of indexing, has voiced concerns on this. 

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