Re-balance Cycle Reminder All MyPlanIQ’s newsletters are archived here.

For regular SAA and TAA portfolios, the next re-balance will be on Tuesday, May 28, 2019. You can also find the re-balance calendar for 2019 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.

Total Return Bond ETFs Review

It’s time to look at total return bond ETFs again. Since our last review August 13, 2018: Total Return Bond ETF, there haven’t been any new actively managed total return bond ETFs. The three actively managed total return bond fund ETFs are:

Total return bond ETF performance comparison (as of 5/10/2019)
ETF Name Fee YTD
1Yr AR 3Yr AR 3Yr Sharpe 5Yr AR
FBND (Fidelity Total Bond ETF) 0.36% 3.6% 5.4% 2.8% 0.62  
FTBFX (Fidelity Total Bond) 0.45% 4.2% 5.5% 2.8% 0.71 2.9%
BOND (PIMCO Total Return Active ETF) 0.76% 4.5% 7.2% 3.3% 0.84 3.2%
PTTAX (PIMCO Total Return A) 0.89% 3.2% 5.0% 2.4% 0.45 2.3%
TOTL (SPDR® DoubleLine Total Return Tact ETF) 0.55% 2.5% 4.9% 2.2% 0.51  
DLTNX (DoubleLine Total Return Bond N) 0.72% 2.2% 4.8% 2.4% 0.67 2.9%
BND (Vanguard Total Bond Market ETF)   3.5% 6.0% 2.0% 0.37 2.5%

See detailed comparison >>

These ETFs can be used as alternatives for total return bond mutual funds. We maintain several portfolios (see total return bond fund fixed income portfolios on Brokerage Investors page) that use these bond funds as cash substitutes when they decide to go to ‘cash’. These include the following:

P SMA 200d VFINX Total Return Bond As Cash Monthly

STS Seasonal Timing Using VFINX Total Return Bond Fund As Cash

Unfortunately, when using a total return bond fund portfolio such as Schwab Total Return Bond in these portfolios, one might run into mutual fund holding period restriction: many brokerages and/or funds impose 3 month minimum holding period. The total return bond ETFs don’t have this restriction and thus can be considered as an alternative for the total return bond mutual fund portfolios. This is becoming more relevant as the stock and bond markets are fast changing in the recently escalated trade war environment. 


Overall, we are pleased to see that these ETFs have done well, closely matching their mutual fund counterparts. From the above table, one can see

  1. BOND has consistently outperform its mutual fund peer PTTAX. It outperformed PTTAX by 1.1% annually for the past 3 years, which is a big difference. Unlike the mutual fund peer, BOND does not use derivatives, which is another advantage as it eliminates one more complicated factor. 
  2. TOTL is also now on par with DLTNX though it still lagged behind in the past three years. 
  3. FBND underperformed FTBFX slightly in the past one year but it does match the 3 year return.
  4. All three ETFs have lower fee ratios than their mutual fund peers. 

With more than three year history, we now can say that these three actively managed bond ETFs are viable (or even better) alternatives to their mutual fund peers. 

Total Return Bond ETF portfolios

 As reported on the previous newsletter August 13, 2018: Total Return Bond ETF, the portfolio Total Return Bond ETFs uses the following ETFs as its candidate funds: 

1Yr AR 3Yr AR 5Yr AR
BOND (PIMCO Total Return Active ETF) 4.5% 7.2% 3.3% 3.2%
TOTL (SPDR® DoubleLine Total Return Tact ETF) 2.5% 4.9% 2.2%  
FBND (Fidelity Total Bond ETF) 3.6% 5.4% 2.8%  
VCIT (Vanguard Intermediate-Term Corp Bd ETF) 6.6% 8.5% 2.8% 3.5%
VMBS (Vanguard Mortgage-Backed Securities ETF) 2.8% 5.5% 1.9% 2.5%
BND (Vanguard Total Bond Market ETF) 3.5% 6.0% 2.0% 2.5%

This portfolio has done well, compared with its mutual fund peer based portfolios:

Portfolio Performance Comparison (as of 5/10/19)
Ticker/Portfolio Name YTD
1Yr AR 3Yr AR
Total Return Bond ETFs 3.9% 4.1% 2.2%
Schwab Total Return Bond 2.4% 2.8% 4.6%
BND (Vanguard Total Bond Market ETF) 3.5% 6.0% 2.0%

 The ETF portfolio now did better in the past one year. The underperformance of the last three years is due to its lacking of corresponding funds for PIMCO Income (PONAX) and PIMCO Investment grade bond (PBDAX) as holding of these two funds in 2017 helped the mutual fund portfolio Schwab Total Return Bond did so much better in that period, which is the main contributing factor for the mutual fund portfolio’s outperformance. However, in the last twelve months, bond market had favored safer bonds that are mostly captured by the three ETFs. 

In a word, the above ETF portfolio is a conservative version of the mutual fund portfolio. It can be really used as an alternative and we expect it will serve for the purpose as a ‘cash’ substitute during a stock market stress. 

Market overview

Though S&P 500 companies continued to beat their earnings expectation for the last quarter (see Factset report, blended earnings growth for the last quarter is now -0.5% vs. expected -4.0% on March 31, 2019), market attention is now turned to US-China trade war friction. As of this writing, stocks are severely affected as both countries started to impose a new round of trade tariffs. As stated previously, in a highly over valued and overly extended stock market, a factor as big as the trade tariff that can seriously impact global economy can no doubt quickly change the bullish sentiment (which is the only key reason to sustain the current stock market rally) to the worse. Though we are aware that it’s possible that the sentiment can be altered quickly by trade negotiation and political maneuver, we call for caution. As always, stay the course and be risk conscious. 

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

In terms of investments, even after the recent retreat, U.S. stock valuation is still at a historically high level and a bigger correction is still waiting to happen. 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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