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 29, 2018. 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.

DoubleLine Shiller CAPE 10 Based Fund Review

We mentioned DoubleLine Shiller Enhanced CAPE Fund (DSENX) in a previous newsletter. Since then, several users have shown considerable interests and asked a few questions. In this newsletter, we will take a more detailed look at the funds. 


Long term readers are no strangers to Shiller Cyclically Adjusted PE 10 (CAPE 10) metric: it’s a long term stock valuation metric which MyPlanIQ has discussed and monitored for a long time. The metric tries to do away short term market noise by measuring current market Price Earnings (PE) using the past 10 year average PE ratio, i.e. the ratio of the current S&P 500 price over the average of the last 10 year S&P 500 companies’ composite earningsExplain CAPE 10. This metric is for S&P 500 index. MyPlanIQ has developed a simple CAPE10 metric based long term timing strategy portfolio P Shiller Cyclically Adjusted PE 10 SO SU Stock Market Timing Strategy Weekly Total Return Bond Funds As Cash listed on Advanced Strategies. We have regularly featured this portfolio in our previous newsletters. 

DoubleLine and Barclay extend this metric to US stock sectors instead and base the 10 US sectors (such as US consumer staples, materials, industrials etc.) to develop an investment strategy based index called Shiller Barclay CAPE US Sector Total Return Index for DoubleLine US mutual fund. The international mutual fund is based on  CAPE 10 metrics to invest in MSCI international sectors. 


Based on DoubleLine’s literature and this, we summarize the funds’ strategy:

  • Find relative CAPE10 ratio: dividing a sector’s current CAPE® ratio by its 20-year rolling average CAPE® ratio and rank the sectors use the relative ratios.
  • Select 5 most undervalued (smallest relative ratios) sectors
  • Remove the sector with the worst trailing 12-month price momentum and invest the remaining 4 sectors equally weight
  • Use swaps to invest in these sectors while use the cash to invest in fixed income bonds as collateral. 

The method of using swaps (i.e. derivatives) and a fixed income portfolio is similar to many PIMCO mutual funds such as its StockPlus fund. It’s a popular way to (hopefully) enhance returns by delivering higher fixed income return to cover the interest/premium of the swaps and some. 

The strategy is a hybrid or modified value strategy that uses last 12-month price momentum to eliminate the worst one. But it’s not similar to the tactical strategy used by MyPlanIQ which only invests in those with positive momentum. 


The US stock fund has outperformed the broad base index by some big margin:

DSENX Performance Comparison (as of 10/19/2018)
Fund Name YTD
1Yr AR 3Yr AR Since 11/01/13
DSENX (DoubleLine Shiller Enhanced CAPE N) 6.0% 10.0% 16.5% 14.6%
VTI (Vanguard Total Stock Market ETF) 4.3% 9.3% 12.7% 11.3%

In almost 5 years, the fund outperformed broad base VTI by 3.3% annually. 

Unfortunately, the international one has underperformed in its almost 2 year history: 

DLEUX Performance Comparison (as of 10/19/2018):
Ticker/Portfolio Name YTD
1Yr AR Since 12/28/16
DLEUX (DoubleLine Shiller Enhanced International CAPE N) -8.7% -9.9% 5.4%
VEA (Vanguard FTSE Developed Markets ETF) -7.9% -5.2% 9.1%

The underperformance is equally noticeable. 

The backtest US Shiller index performance is also impressive: 

Unfortunately, we don’t have data for its international index. 


In our previous newsletter September 10, 2018: Value, Growth And Blend Stock Style Investing, we pointed out the drawback to invest in a pure value or pure growth style fund. The DoubleLine funds represent an enhanced or modified value strategy: it invests in value sectors with a technical momentum tilt: only invests in those relatively undervalued sectors that are worst in terms of their recent returns. 

In general, we prefer ‘quant’ or index stock funds that are based on a systematic and clearly defined strategy instead of being subject to more unpredictable human intelligence and emotion. The DoubleLine Shiller funds fit into this category. 

The strategy, however, is still not completely validated, in our opinion: the underperformance of the international fund shows. Though one can argue that the (international) fund has only been in existence for less than two years and thus it still has plenty of time to catch up, intuitively, we believe the strategy should be improved further to only invest in those sectors that show positive momentum. International stocks have been weak for the past several years and in a down market, the worst performers can further underperform and that’s probably one of the main factors for the international fund’s underperformance. 

Maybe a way to remedy this is to incorporate the funds in our TAA style portfolios (along with major index funds). But that’s still subject to more studies and we believe this should be left for expert or experienced investors to pursue. 

Market Overview

Stock markets have been giving some serious downtrend signals: last week, US stocks didn’t recover from its free fall the week before. At the moment, all three major US stock indices: S&P 500, mid cap and small cap are under their 200 days moving averages. However, REITs staged some strong rebound last week. Though the weakness is pretty comprehensive, it’s still not the right time to conclude that stocks are in a firm downtrend. Again, we shall stick to our well defined strategies and do not want to react to markets impulsively. 

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

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 about 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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