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.
Conservative Portfolios Review
We discussed the conservative portfolios listed on What We Do -> Brokerage Investors page in several newsletters:
- January 30, 2017: Brokerage Specific Conservative Portfolios
- April 11, 2016: Construction of Sound And Conservative Portfolios
We are especially interested in these portfolios in the current environment where stocks are very overvalued and the interest rates of bonds are at historically low. As stated previously, these portfolios usually have the best risk adjusted returns among all of risk profiles. Furthermore, they can still deliver very reasonable returns even when markets are frothy. In fact, so far, these portfolios have delivered very respectable returns.
Reasonable returns
Ticker/Portfolio Name | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR | AR Since 1/1/2001 |
---|---|---|---|---|---|---|
Schwab Conservative Total Return Dividend Portfolio | 7.6% | 8.5% | 5.7% | 7.3% | 8.2% | 8.8% |
Fidelity Conservative Total Return Dividend Portfolio | 7.6% | 7.6% | 4.9% | 6.7% | 7.9% | 8.6% |
TDAmeritrade Conservative Total Return Dividend Portfolio | 7.3% | 6.8% | 5.2% | 6.9% | 8.3% | 8.7% |
Folioinvesting Conservative Total Return Dividend Portfolio | 7.6% | 8.4% | 5.8% | 7.2% | 8.4% | 8.5% |
Etrade Conservative Total Return Dividend Portfolio | 7.7% | 8.1% | 5.8% | 7.2% | 8.3% | 8.6% |
Merrill Edge Conservative Total Return Dividend Portfolio | 7.6% | 7.6% | 5.5% | 7.1% | 9.0% | 8.2% |
Vanguard Conservative Total Return Dividend Portfolio | 7.6% | 8.4% | 5.8% | 7.2% | 8.4% | 9.2% |
VWINX (Vanguard Wellesley Income Inv) | 6.7% | 7.0% | 6.0% | 6.9% | 6.9% | 7% |
BERIX (Berwyn Income) | 2.5% | 3.4% | 2.3% | 5.6% | 6.6% | 7.6% |
Year to date, these portfolios have outperformed our benchmark VWIUX (Vanguard Interm-Term Tx-Ex Adm) by almost 1%. They do even much better than another respectable conservative mutual fund BERIX (Berwyn Income) — for some reason, the fund has done poorly this year (2.5% so far). It’s even more impressive when compared in longer time frames like 3, 5, 10 years and since 2001 (8.8% vs. 7%).
Let’s break down the performance of the components of these portfolios. Recall that a conservative portfolio consists of
USStocks VDIGX 20%
REITs VGSIX 10%
TotalReturnBond Portfolio P_46880 70% (Brokerage specific)
Ticker/Portfolio Name | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR |
---|---|---|---|---|---|
Schwab Total Return Bond | 6.5% | 6.7% | 4.0% | 5.2% | 8.1% |
VDIGX (Vanguard Dividend Growth Inv) | 12.8% | 15.0% | 9.3% | 12.6% | 8.5% |
VGSIX (Vanguard REIT Index Inv) | 5.1% | 4.2% | 10.0% | 8.9% | 6.6% |
VFINX (Vanguard 500 Index Investor) | 13.2% | 18.7% | 10.2% | 13.5% | 7.5% |
VBMFX (Vanguard Total Bond Market Index Inv) | 3.2% | 0.7% | 2.8% | 2.1% | 4.2% |
From the above, we see that REIT component has underperformed against general markets (S&P 500 VFINX). Fortunately, the fixed income portion has done so much better than its fixed income benchmark VBMFX (Vanguard Total Bond Market Index Inv) (6.5% vs. 3.2% ) and that has contributed to the portfolio’s outperformance. This is not surprising as this portfolio’s main strength is in its fixed income investments. In fact, the stock portion merely consists of the two index funds. Compared with VWINX or BERIX, we can probably deduce that our fixed income investments have done much better than theirs.
To summarize, these conservative portfolios’ returns are very respectable. We believe for conservative investors, using these portfolios can help to mitigate the risk in the current environment: we want to emphasize that contrary to popular belief, investment risk in an elevated market environment (like the current one) is actually much higher than the one when markets are distressed.
Alternative portfolios
In addition to the above conventional conservative portfolios, we also monitor some alternative conservative portfolios on What We Do -> Brokerage Investors page. So far this year, these portfolios have also done well:
Ticker/Portfolio Name | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR | 10Yr Sharpe |
---|---|---|---|---|---|---|
Harry Browne Permanent Portfolio | 8.5% | 3.9% | 4.8% | 3.3% | 5.9% | 0.81 |
Permanent Income Portfolio | 5.1% | 4.4% | 5.5% | 4.7% | 6.0% | 0.95 |
My Simple Alternative Hedge Fund | 8.3% | 7.4% | 3.6% | 6.1% | 8.4% | 1.07 |
VWINX (Vanguard Wellesley Income Inv) | 6.7% | 7.0% | 6.0% | 6.9% | 6.9% | 1 |
These portfolios rely on gold and long term bonds to hedge the risk in risk assets (stocks). Among these, My Simple Alternative Hedge Fund that consists of the following:
P_51098 (MyPlanIQ Diversified Core Allocation ETF Plan Tactical Asset Allocation Most Aggressive) 42%
P_46880 (Schwab Total Return Bond) 28%
VWINX (Vanguard Wellesley Income Inv) 15%
P_17551 (Harry Browne Permanent Portfolio) 10%
BERIX (Berwyn Income) 5%
has an 8.3% return year to date. It has much lower maximum drawdown (peak to trough): 13% vs. VWINX’s 21% while it has had a better return for the past 10 years.
Fund Name | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR |
---|---|---|---|---|---|
VFINX (Vanguard 500 Index Investor) | 13.2% | 18.7% | 10.2% | 13.5% | 7.5% |
VUSTX (Vanguard Long-Term Treasury Inv) | 7.6% | -2.6% | 6.0% | 3.9% | 6.7% |
GLD (SPDR Gold Shares) | 14.5% | 0.1% | 1.9% | -6.1% | 6.0% |
VIPSX (Vanguard Inflation-Protected Secs Inv) | 2.5% | 1.1% | 1.9% | -0.0% | 3.7% |
It’s especially surprising that long bonds like VUSTX (Vanguard Long-Term Treasury Inv) have defied many pundits’ dire prediction, delivering a good return that has helped to contribute to the outstanding performance.
Summary
The ongoing performance of the conservative portfolios has demonstrated that it’s possible to construct a good portfolio without taking excessive risk. It’s possible to use a good fixed income portfolio and some basic stock index funds to construct a portfolio that outperforms even the best conservative funds. Furthermore, some exposure to tactical portfolios and alternative assets such as gold and long term bonds also helps.
Finally, we want to point out that it’s also possible to extend stock exposure to international and emerging stocks. Investors can use some allocations among risk assets from a good strategic asset allocation portfolio such as P David Swensen Yale Individual Investor Portfolio Annual Rebalancing for this purpose.
Market Overview
Stocks continued to break records. Markets are still exhibiting no much fear: the CBOE implied volatility index VIX is now back to 10, which is close to record low. Factset predicts that earnings of S&P 500 companies in Q3 2017 will grow 4.5%. Again, we have no idea when markets will turn down but it’s prudent to manage risk properly and be prepared for such an eventual event.
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.
Latest Articles
- September 11, 2017: International Diversification Effect
- September 4, 2017: Invest And Speculate Revisited
- August 28, 2017: Total Return Bond Fund Portfolios: Where Do They Fit?
- August 21, 2017: Portfolio Performance: A Walk In The Past
- August 14, 2017: Fidelity Commission Free ETFs Update
- August 7, 2017: I Didn’t Learn Anything — Mistake vs. Temporary Underperformance
- July 31, 2017: Asset Classes And Fund Choices: A Primer
- July 24, 2017: Total Return Bond Fund Portfolios And Cash
- July 17, 2017: Long Term Stock Holding Periods For Retirement
- July 10, 2017: Half Year Asset Trend Review
- June 26, 2017: How To Beat The Best Balanced Allocation Fund
- June 19, 2017: Newsletter Collection Update
- June 12, 2017: A Mixed Bag Performance of Momentum Investing
- June 5, 2017: How To Start A New Portfolio
- May 29, 2017: Alternative Assets And Their Role In Portfolios
- May 22, 2017: Summer Seasonality And Portfolio Management
- May 15, 2017: Cash: Banking Or Investing?
- May 8, 2017: Holding Period of Long Term Timing Portfolios
- May 1, 2017: Debate on Risk vs. Volatility
- April 24, 2017: The Long Term Stock Market Timing Return Since 1871
- April 17, 2017: Risk vs. Volatility: Long Term Stock Market Returns
- April 10, 2017: Total Return Bond ETFs And Portfolios
- April 3, 2017: Quarter End Asset Trend Review
- March 27, 2017: Practical Consideration For IRAs And 401k Accounts
- March 20, 2017: Fund Fees: That’s (Still) Outrageous
- March 13, 2017: Long Term Stock Valuation Review
- March 6, 2017: Asset Classes for Retirement Investments
- February 27, 2017: Fidelity Total Bond Fund Review
- February 20, 2017: Long Term Stock Timing Based Portfolios And Their Roles
- February 13, 2017: Alternative Investment Portfolios Review
- February 6, 2017: Tax Free Municipal Bond Investments Review
- January 30, 2017: Brokerage Specific Conservative Portfolios
- January 23, 2017: Fixed Income Portfolio Review
- January 16, 2017: Long Term Trend Following Portfolio Review
- January 9, 2017: Tactical Asset Allocation Review
- January 3, 2017: Strategic Asset Allocation Review
- December 12, 2016: Enhanced Index Funds
- December 5, 2016: Review Of Broad Base Core Mutual Funds For Brokerages
- November 28, 2016: Core Index ETFs Review
- November 21, 2016: International Exposure Of U.S. Large Companies
- November 14, 2016: Asset Trends After The Election
- November 7, 2016: Rising Rate And Current Bond Trend
- October 31, 2016: Economy Power And Long Term Stock Returns
- October 24, 2016: Current Commodity Trend And Managed Futures
- October 17, 2016: Investment Mistakes And Good Or Bad Investment Strategies
- October 10, 2016: Momentum Investing Review
- October 3, 2016: Survey & Feedback
- September 26, 2016: Fixed Income Investing: Actively Managed Funds vs. Index Funds
- September 19, 2016: Stock Investing: Actively Managed Funds vs. Index Funds
- September 12, 2016: Newsletter Update
- September 5, 2016: Overvalued Markets And Long Term Timing Strategies
- August 29, 2016: Your 401K Finally Draws Attention
- August 22, 2016: Inflation Protected Securities TIPS For Current Overvalued Markets
- August 15, 2016: Risk On: Emerging Market Stocks And Small Cap Stocks
- August 8, 2016: Portfolio Construction Using Stock ETFs And Bond Mutual Funds
- August 1, 2016: Adding Value To Your Own Investments
- July 25, 2016: Tactical Asset Allocation Funds Review
- July 18, 2016: Strategic Asset Allocation & Lazy Portfolio Review
- July 11, 2016: Asset Trend Review
- June 27, 2016: Secular Cycles For Tactical And Strategic Investment Strategies
- June 20, 2016: A World of Debt
- June 13, 2016: Managed Futures For Portfolio Building
- June 6, 2016: Newsletter Summary
- May 30, 2016: Swensen Portfolio And Permanent Portfolios
- May 23, 2016: AAII Article And Some Web Changes
- May 16, 2016: The PIMCO (Dis)Advantages
- May 9, 2016: Boost Your Dull Summer Investments
- May 2, 2016: Low Cost Index Fund Investing
- April 25, 2016: Tax Free Municipal Bond Funds & Portfolios
- April 18, 2016: Asset Class Trend Review
- April 11, 2016: Construction of Sound And Conservative Portfolios
- March 28, 2016: Total Return Bond ETFs Review
- March 21, 2016: Small And Large Company Stock Performance In Different Economic Expansion Cycles
- March 14, 2016: Are Tactical And Timing Strategies Losing Steam?
- March 7, 2016: Defined Maturity Bond Fund Analysis
- February 29, 2016: Smart Strategic Asset Allocation Rebalance When Market Trend Changes
- February 22, 2016: Be Cash Smart
- February 15, 2016: Bond ETF Portfolios
- February 8, 2016: Newsletter Collection Update
- February 1, 2016: Total Return Bond Fund Portfolios In A Volatile Period
- January 25, 2016: Alternative Portfolios Review
- January 18, 2016: Strategic Asset Allocation: A Cautious Outlook
- January 11, 2016: Review Of Trend Following Tactical Asset Allocation
- January 4, 2016: What Worked And Didn’t In 2015
- December 21, 2015: Distressed Assets
- December 14, 2015: High Yield Bonds And Their Correlation With Stocks
- December 7, 2015: Diversification And Global Allocation
- November 30, 2015: Investors and Speculators Combined
- November 23, 2015: Active Stock Fund Performance Consistency
- November 16, 2015: Permanent, Risk Parity And Alternative Portfolios Review
- November 9, 2015: Broad Base Core Mutual Fund Review
- November 2, 2015: Broad Base Index Core ETFs Review
- October 26, 2015: Total Return Bond Fund Review
- October 19, 2015: Advanced Portfolio Review
- October 12, 2015: What About Commodities?
- October 5, 2015: Core Satellite Portfolios In A 401k Account
- September 28, 2015: Risk Managed Strategic Asset Allocation Portfolios Revisited
- September 21, 2015: Quest For The Best Investment Strategy
- September 14, 2015: Core Satellite Portfolios In Market Turmoil
- September 7, 2015: Market Rout Creates An Opportunity to Reposition Your Portfolios
- August 31, 2015: Review of Asset Allocation Funds and Portfolios
- August 24, 2015: Market Rout And Your Portfolios
- August 17, 2015: ETF or Mutual Fund Based Portfolios
- August 10, 2015: Updated Newsletter Collection
- August 3, 2015: Slippery Asset Trends
- July 27, 2015: Performance Dispersion Among Momentum Based Portfolios
- July 20, 2015: Global Balanced Portfolio Benchmarks
- July 13, 2015: Pain in Tactical Portfolios
- July 6, 2015: Fixed Income Total Return Bond Funds In Strategic Asset Allocation Portfolios
- June 29, 2015: Core ETF Commission Free Portfolios
- June 22, 2015: Secular Asset Trends
- June 15, 2015: Giving Up Bonds?
- June 1, 2015: Summer Blues?
- May 26, 2015: Cash, Bonds and Stocks In A Rising Rate Environment
- May 18, 2015: Portfolio Update
- May 11, 2015: Pain in Fixed Income?
- May 4, 2015: The Balanced Stock and Long Term Treasury Bond Portfolios
- April 27, 2015: Long Term Treasury Bond Behavior
- April 20, 2015: 529 College Savings Plan Rebalance Policy Change
- April 13, 2015: Total Return Bond Funds As Smart Cash
- April 6, 2015: The Low Return Environment
- March 30, 2015: Brokerage Specific Core Mutual Fund Portfolios 2
- March 23, 2015: Investment Arithmetic for Long Term Investments
- March 16, 2015: Brokerage Specific Core Mutual Fund Portfolios
- March 9, 2015: Newsletter Collection Update
- March 2, 2015: Total Return Bond ETFs
- February 23, 2015: Why Is Global Tactical Asset Allocation Not Popular?
- February 16, 2015: Where Are Permanent Portfolios Going?
- February 9, 2015: How Have Asset Allocation Funds Done?
- February 2, 2015: Risk Management Everywhere
- January 26, 2015: Composite Portfolios Review
- January 19, 2015: Fixed Income Investing Review
- January 12, 2015: How Does Trend Following Tactical Asset Allocation Strategy Deliver Returns
- January 5, 2015: When Forecast Fails
- December 22, 2014: Long Term Asset Returns: How Long Is Long?
- December 15, 2014: Beaten Down Assets
- December 8, 2014: Implementing Core Asset Portfolios In a Brokerage
- December 1, 2014: Two Key Issues of Investment Strategies
- November 24, 2014: Holiday Readings
- November 17, 2014: Retirement Spending Portfolios Update
- November 10, 2014: Fixed Income Or Cash
- November 3, 2014: Asset Trend Review
- October 27, 2014: Investment Loss, Mistakes And Market Cycles
- October 20, 2014: Strategic Portfolios With Managed Volatility
- October 13, 2014: Embrace Volatility
- October 6, 2014: Tips For 401k Open Enrollment
- September 29, 2014: What Can We Learn From Bill Gross’ Departure From PIMCO?
- September 22, 2014: Why Total Return Bond Funds?
- September 15, 2014: Equity And Total Return Bond Fund Composite Portfolios
- September 8, 2014: Momentum Based Portfolios Review
- September 1, 2014: Risk & Diversification: Mint.com Interview
- August 25, 2014: Remember Risk
- August 18, 2014: Consistency, The Most Important Edge In Investing: Tactical Case
- August 11, 2014: What To Do In Overvalued Stock Markets
- August 4, 2014: Is This The Peak Or Correction?
- July 28, 2014: Stock Musings
- July 21, 2014: Permanent Portfolios & Four Pillar Foundation Based Framework
- July 14, 2014: Composite Portfolios Review
- July 7, 2014: Portfolio Behavior During Market Corrections
- June 30, 2014: Half Year Brokerage ETF and Mutual Fund Portfolios Review
- June 23, 2014: Newsletter Collection Update
- June 16, 2014: There Are Always Lottery Winners
- June 9, 2014: The Arithmetic of Investment Mistakes
- June 2, 2014: Tips On Portfolio Rebalance
- May 26, 2014: In Praise Of Low Cost Core Asset Class Based Portfolios
- May 19, 2014: Consistency, The Most Important Edge In Investing: Strategic Case
- May 12, 2014: How To Handle An Elevated Overvalued Market
- May 5, 2014: Asset Allocation Funds Review
- April 28, 2014: Now The Economy Backs To The ‘Old Normal’, Should Our Investments Too?
- April 21, 2014: Total Return Bond Investing In The Current Market Environment
Enjoy Newsletter
How can we improve this newsletter? Please take our survey
–Thanks to those who have already contributed — we appreciate it.