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 9, 2017. You can also find the re-balance calendar for 2017 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.

International Diversification Effect

For many global oriented asset allocation investors, 2017 so far has been an interesting year. To begin with, at the beginning of the year, we were very concerned about US stocks’ valuation. We have indicated our uneasiness on this for quite some time. In fact, if one looks at the time the long term valuation based portfolio P Warren Buffett Total Stock Market Valuation to GNP Ratio SO SU Weekly Strategy Total Return Bond Funds As Cash went into ‘cash’ or bonds, it was in December 2014. So 2 and half years and going. 

On the other hand, many good investment managers such as PIMCO All Asset’s Rob Arnott were steadfast to point out that emerging market stocks and international stocks were much undervalued, compared with US stocks. So these funds maintained or overweighed their exposure in these stocks. This has proved to be very effective. Thus far, the international diversification again proves its mantle in asset allocation. 

US stocks lagged this year

As much as investors are happy with stock returns this year, it turns out US stocks have lagged behind foreign stocks: 

US stocks vs. foreign stocks (as of 9/11/2017)
Fund YTD
1Yr AR 3Yr AR 5Yr AR 10Yr AR

12/31/00 to


VTSMX (Vanguard Total Stock Mkt Idx Inv) 10.7% 14.6% 8.8% 13.4% 7.8% 4.8%
VGTSX (Vanguard Total Intl Stock Index Inv) 20.4% 16.7% 3.3% 7.4% 2.0% 10.4%
VEIEX (Vanguard Emerging Mkts Stock Idx) 25.1% 17.9% 1.4% 4.3% 2.1% 23%

**YTD: Year to Date

In fact, US stocks underperformed by a large margin so far this year: as much as by more than 15%. On the other hand, we remind readers that both international stocks and emerging market stocks have abysmal 10 year performance: 2% vs. US stocks’ 7.8% annual return. 

But this is not new: the highlighted column in the above table shows that US stocks severely lagged behind foreign stocks from 2000 to 2007.  In fact, until the end of last decade, global allocation portfolios had consistently outperformed US stocks centric portfolios. 

Whether markets can substain this trend is anybody’s guess. But the odds are definitely good. 

Global allocation funds outperformed

For years, we have monitored some of the best global allocation funds listed on SmartMoneyIQ Managers page. Unfortunately, in the past several years, it was depressing to compare these funds with a simple 60% US stocks and 40% US bonds index fund VBINX (Vanguard Balanced Index Inv) as they have lagged severely. 

The tide has turned this year so far: 

Global Allocation Funds Performance Comparison (as of 9/11/2017):
Fund Name YTD
1Yr AR 3Yr AR 5Yr AR 10Yr AR 10Yr Sharpe
PASDX (PIMCO All Asset D) 11.2% 11.7% 2.6% 3.6% 5.1% 0.57
PGMAX (PIMCO Global Multi-Asset A) 10.0% 10.4% 3.7% 2.3%    
GBMFX (GMO Benchmark-Free Allocation III) 10.6% 9.7% 2.2% 4.8% 5.1% 0.62
WASYX (Ivy Asset Strategy Y) 12.0% 10.9% -2.1% 4.0% 4.3% 0.27
MALOX (BlackRock Global Allocation Instl) 10.8% 10.9% 3.9% 6.5% 5.1% 0.42
SGIIX (First Eagle Global I) 9.3% 9.5% 5.8% 8.2% 7.0% 0.5
DMLIX (DoubleLine Multi-Asset Growth I) 10.2% 12.1% 6.3% 5.0%    
VBINX (Vanguard Balanced Index Inv) 8.0% 8.9% 6.5% 8.9% 6.7% 0.53

In fact, year to date all of these funds has had better returns than VBINX. However, other than SGIIX, all other funds have underperformed VBINX by 2-6% annually for the past 5 years. SGIIX is also the only one that did better than VBINX in the last 10 years. 

GMO’s GBMFX, a stellar balanced fund, recently has large allocation in (or correlation with) international stocks (see our SmartMoneyIQ Managers page):

GMO Benchmark Free Allocation (GBMFX)

Date IntlBond CASH USBond IntlStk USStk
2017-08-18 0.0 51.4 0.0 44.6 4.0
2017-08-25 0.0 48.3 0.0 48.7 3.0
2017-09-01 0.0 52.2 0.0 38.5 9.3
2017-09-08 0.0 51.5 -0.0 37.5 11.0

Please note that the above allocations are derived using our regression algorithm, it’s really just an indication on how closely correlated a fund is to an asset class (such as IntlStks or USStks). They are not necessarily the same as the actual allocations. 

PIMCO’s PASDX virtually has no allocation to US stocks:


Date IntlBond CASH USBond IntlStk USStk
2017-08-18 0.0 24.3 46.5 29.2 -0.0
2017-08-25 0.0 30.9 40.4 28.8 -0.0
2017-09-01 0.0 21.0 48.0 31.1 -0.0
2017-09-08 1.6 24.9 41.7 31.8 0.0

SGIIX mostly allocates to US stocks, but it has sizable international bond exposure. Furthermore, it is well known that the fund allocates in gold for diversification. At this moment, it has about 6.6% in gold commodity. That also helps its performance as gold has done well this year.  

First Eagle Global (SGIIX)

Date IntlBond CASH USBond IntlStk USStk
2017-08-18 12.2 17.1 15.4 12.0 43.3
2017-08-25 11.2 17.2 17.4 7.3 47.0
2017-09-01 15.3 24.5 5.7 10.3 44.2
2017-09-08 16.6 26.8 3.2 7.6 45.8

Interested readers are encouraged to look at the Smart Manager’s page to see how these funds are allocated/behaved with respect to the major asset classes. 


This year’s performance reenforces the concept of diversification. Besides this, what we have learned is that market rotation in various market environments can happen in a meaningful way, even when a market (such as US stocks) is very overvalued.  Though it’s possible that amid strong performance of US stocks (and thus the overvaluation), stocks including foreign and emerging market ones can come crashing down, along with US stocks. However, one has to consider several scenarios: first, even if US stocks and foreign stocks might experience a steep correction, it’s likely that the foreign stocks might correct less as their valuations are more reasonable. Furthermore, if US stocks continue their ascent, foreign stocks can rise even more. This scenario is exactly what has happened. Thus, overweight in foreign stocks at the beginning of the year or even last year proves to be a good bet. 

Regardless, the relative performance among all these stock assets again points to the importance of sticking to a well designed plan. Markets can ebb and flow, portfolio allocation strategies should remain the same. 

Market Overview

Hurricane Irma turns out to be less damaging and this has sparked another rally in stocks. At the moment, S&P 500 reaches another another all time high. Bonds have also avoided the widely predicted demise so far. It seems that the goldilocks continue. For us, the best way is always to stay the course, reaping benefits from whatever markets can give while properly managing risk. 

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

Now that the Trump administration has been in the office for more than half a year, it has stumbled and encountered many difficulties to implement its promised changes in terms of tax cuts, job stimulation and infrastructure spending. On the other hand, stocks continued to ascend, regardless of the progress. Looking ahead, however, we remain convinced that markets will experience more volatilities at some point when reality finally sets in. 

In terms of investments, 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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