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: 

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

Conservative portfolio annualized returns (as of 9/18/2017)
Ticker/Portfolio Name YTD
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%
TotalReturnBond Portfolio  P_46880 70% (Brokerage specific)

Portfolio Performance Comparison (as of 9/18/2017)
Ticker/Portfolio Name YTD
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:

Portfolio Performance Comparison (as of 9/18/2017):
Ticker/Portfolio Name YTD
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. 

The components in these portfolios, stocks, long bonds and gold returns (as of 9/18/2017):
Fund Name YTD
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. 


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. 

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