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, December 18, 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.
Cash Return And Interest Rate Update
As markets are in the mid of interest rate update cycle, yields of short term Treasury bills and bonds have risen gradually this year. In this newsletter, we look at the latest short term cash equivalent returns and interest rate trends.
Rates have risen
Short term rates have risen dramatically while long term Treasury bond yield (10 year) has remained flat:
The yield curve (or the difference) between one year and 10 year yields have declined markedly. The flat 10 year interest rate indicates that investors are expecting a subdue economy growth (and inflation). The fast rising short term rate is mainly affected by the Federal Reserve’s recent rate hike.
Similarly, yields of other short term Treasury debts have risen fast:
Banks continue to offer measly cash returns
However, interest rates from major banks are still depressed to close to 0:
|One Month T-Bill Rate||3 Month T-Bill Rate||Bank of America Savings||Chase Bank Savings|
As we mentioned in September 25, 2017: Fees In Cash Investments, banks essentially are raking in more than 1% of your deposit money by paying almost zero interest to you as a customer. The gap is now even bigger as short term yields from Treasury Bills are much higher now. As a reminder, you can directly purchase Treasury bills (T-Bill) online from TreasuryDirect.com or even from your brokerage accounts free from fee.
As stated in that newsletter, you can also purchase brokered CDs from your brokerage account (not the CDs offered from your banks but the ones from exchanges). For example, the latest CDs offered from Schwab:
|Maturity||1 Month||3 Months||6 Months||Selected 1 Year|
|Schwab CD APY(%)||1.257||1.407||1.557||1.750|
|T-Bill APY (%)||1.11||1.26||1.44||1.64|
You can get approximately 0.1% or so higher interest payment by going to CDs in lieu of Treasury bills. Again, some simple management of your cash can help you to gain more than 1% return.
Longer term bond portfolio update
In another newsletter October 2, 2017: The Role of Short Term Bond Funds, we stated that for any cash that’s needed in more than 2 years, one can choose to invest in a total return bond fund portfolio listed on MyPlanIQ’s Brokerage Investors page. These portfolios are rebalanced once a month using an active strategy that can choose to invest in cash (money market) if bonds are in stress.
These total return bond fund portfolios have continued to perform well:
Latest Fixed Income Bond Fund Portfolios Performance Comparison (as of 12/9/2017):
|1Yr AR||3Yr AR||5Yr AR||10Yr AR|
|Schwab Total Return Bond||7.1%||7.6%||4.1%||4.5%||8.0%|
|Fidelity Total Return Bond||8.5%||9.1%||3.3%||4.0%||7.5%|
|TDAmeritrade Total Return Bond||8.4%||8.7%||3.8%||4.4%||8.0%|
|FolioInvesting Total Return Bond||7.1%||7.6%||4.1%||4.5%||8.0%|
|Etrade Total Return Bond||6.6%||6.2%||4.0%||4.4%||8.0%|
|Merrill Edge Total Return Bond||7.1%||7.6%||3.8%||4.4%||8.9%|
|Vanguard Brokerage Total Return Bond||7.1%||7.6%||4.1%||4.5%||8.2%|
|PTTRX (PIMCO Total Return Instl)||5.0%||5.2%||2.7%||2.2%||5.3%|
|VBMFX (Vanguard Total Bond Market Index Inv)||3.1%||3.2%||2.1%||1.8%||3.9%|
To summarize, interest rates have risen gradually. However banks continue to offer depressing cash returns. For short term cash need, one can try to purchase short term Treasury bills or CDs from brokerages that offer more than 1% returns over banks. For cash needed in more than 2 years, our total return bond portfolios continue to be the best choice, even among intermediate bond funds managed by some of the best fixed income managers.
As Republican controlled congress is near to pass a tax reform bill that clearly will benefit stock share holders (though it’s much more unclear how much it can help economy and the Main Street), US stocks are again in record high territory. Investors are now chasing those such as financials that are considered to have higher benefits from the tax bill. Long term Treasury rate remains to be flat while short term rates continue to rise. At some point, the flattened yield curve can signal some trouble, but it does not seem to be happening in the near term. Regardless, we shall stay the course.
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.
- December 4, 2017: Mutual Fund Star Ratings: Are They Useful?
- November 20, 2017: Thankful And Mindful
- November 13, 2017: Is This A Good Time For Retirees Or Would Be Retirees?
- November 6, 2017: Newsletter Collection Update
- October 30, 2017: Rising Interest Rates
- October 23, 2017: A Primer For Portfolios
- October 16, 2017: REITs As An Asset Class
- October 9, 2017: Conservative Portfolios Revisited
- October 2, 2017: The Role of Short Term Bond Funds
- September 25, 2017: Fees In Cash Investments
- September 18, 2017: Conservative Portfolios Review
- 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