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

Regular AAC (Asset Allocation Composite), SAA and TAA portfolios are always rebalanced on the first trading day of a month. the next re-balance will be on Friday March 1, 2020.

Please note: As of today, we now officially phase out our old rebalance calendar for both SAA and TAA. They are now always rebalanced on the first trading day of a month. 

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.

Rebalance and newsletter emails

It has come to our attention that some (not all) of our recent rebalance/newsletter emails were rejected by gmail and Google supported email systems. As a result, some of these users haven’t been able to receive these emails.

At the moment, we are working hard to resolve this issue.

In the meantime:

For rebalance: please visit and login to your account, go to dashboard and check your portfolio rebalance instructions. In general, it’s always a good idea to visit your dashboard on for the latest updates, especially in a month end.

For newsletters, please visit for latest newsletters.

Thank you for your understanding.

Investment Landscape For Retirees And Would-be Retirees: Stocks

We continue our discussion on investing strategies for retirees. Previously, we discussed the issues on fixed income (bonds). We advocate using a tactical strategy such as our total return bond funds or MPIQ Core ETFs Fixed Income portfolios that are listed on Brokerage Investors page.

Stocks for retirees or would-be retirees

A natural question is why a retiree’s investment portfolio needs to have stock exposure. In general, these are the considerations:

  1. To increase returns: stocks usually deliver better average returns in a long period of time. As we stated numerous times, we want to quantify the concept of ‘long period of time’: for us, we mean 20 years or so. At minimum, one should be prepared for 15 years to see such a better average return.
  2. To diversify: another important benefit to have stock exposure is actually diversification: studies have shown that a conservative allocation portfolio actually delivers the best risk adjusted returns. We have long advocated conservative portfolios for retirees and risk averse investors (see April 11, 2016: Construction of Sound And Conservative Portfolios).
  3.  For estate purpose: of course, another consideration is for estate consideration: to leave some assets whose values have greatly appreciated. If you happen to hold some individual stocks or stock index funds for a long time, you might want to continue to hold them so that your heirs can inherit eventually. Your heirs will get a huge tax benefit as the cost basis will be reset to the value of a stock when it is inherited.

Of course, if you have a specific need for certain capital in a preset time (such as paying college tuitions for your grandkids in five years), this capital should be treated differently. For example, if the capital is needed within 10 years, we would suggest you invest them in a fixed income portfolio or have very little stock exposure.

Stocks in a conservative portfolio

So it’s probably a good idea for retirees to consider to have up to 30% stock exposure in their overall investments. Unless for the already highly appreciated stocks or stock funds that you can afford to set aside for estate purpose, a retiree should be aware that the current investment climate is not friendly to buy and hold stock investors (see previous newsletter).

In fact, as stocks are at an extremely overvalued level, we are increasingly confident that a good tactical portfolio such as those based on our Asset Allocation Composite (AAC)  will outperform a strategic buy and hold portfolio in the coming decade. The following table and chart show the comparison among the portfolios and VFINX (Vanguard S&P 500 index fund):

Portfolio Performance Comparison (1/1/2001 to 1/1/2011):
Ticker/Portfolio Name AR (1/1/2001 to 1/1/2011) Standard deviation (1/1/2001 to 1/1/2011)
P SMA 200d VFINX Total Return Bond As Cash Monthly 12.3% 10.8%
P Composite Momentum Market VFINX 11.7% 11.2%
VFINX (Vanguard 500 Index Investor) 1.6% 21.8%

AR*: Annualized Return

In the above comparison, we compare returns in a 10 year period from 1/1/2001 when stocks had declined from its record high/peak in September 2000. The subsequent two bear markets and the recovery in between (and since 2009) couldn’t help recoup much of the loss for S&P 500 (VFINX): it had a annualized return 1.6% in this 10 year period. In fact, from the above chart, one can see that even if we only compare up to the end of 2007, the peak of the bull market following the 2000 bear market, S&P 500 didn’t fare much better and it was way behind the two tactical portfolios.

P SMA 200d VFINX Total Return Bond As Cash Monthly in the above comparison is just a simple 200 day moving average based portfolio while P Composite Momentum Market VFINX is the portfolio that bases on our Asset Allocation Composite (AAC) market indicator to buy VFINX or sell VFINX and invest in an intermediate term Treasury bond fund. Both portfolios are listed on Advanced Strategies page.

These two portfolios have achieved more than 11% annualized returns in this 10 year period, a very reasonable feat. In addition, they have much lower volatility and interim loss: about 20% maximum drawdown vs. VFINX’s 55%!

What we can learn from the above comparison is that it’s possible to derive a reasonable returns in a period of bear and bull markets, even this period begins with an extreme stock valuation like in 2001. Though no one can guarantee what’s going to happen next, it’s more sensible to us that one should adopt a sound tactical strategy in such a situation.

Putting it together

In the past, we have featured (and continue to feature) conservative portfolios listed on our Old Brokerage Investors page (or see newsletters like April 11, 2016: Construction of Sound And Conservative Portfolios for more information).

These portfolios hold stocks (US dividend paying stock index fund and US REITs index fund) in their 20-30% range while investing the rest in a total return bond fund portfolio. For example, Schwab Conservative Total Return Dividend Portfolio holds the following:

USStocks: Vanguard Dividend Appreciation Fund VDIGX 20%
REITs: Vanguard US REIT Index Fund VGSIX 10%
Fixed Income: Schwab Total Return Bond 70%

For those who are more concerned about risk and the subsequent returns in the coming decade, we again would recommend following our AAC ETF portfolio like MPIQ Core ETFs Asset Allocation Composite Conservative that can invest up to 30% to stocks. For the comparison purpose, we again use the mutual fund portfolio MPIQ Core Asset Mutual Funds Asset Allocation Composite Conservative (this portfolio is only suitable for Schwab investors as it uses those total return bond funds available for Schwab)

Portfolio Performance Comparison (as of 2/3/2020):
Ticker/Portfolio Name MaxDD 1Yr AR 3Yr AR 5Yr AR 10Yr AR 15Yr AR AR Since 1/1/2001
MPIQ Core Asset Mutual Funds Asset Allocation Composite Conservative 7.7% 13.0% 8.1% 6.6% 9.2% 9.5% 10.6%
Schwab Conservative Total Return Dividend Portfolio 20.1% 15.0% 8.3% 6.4% 8.8% 8.4% 8.7%
VWINX (Vanguard Wellesley Income Inv) 23.2% 14.2% 7.7% 6.4% 8.0% 6.9% 7.1%

AR: Annualized Return. MaxDD: Maximum Drawdown (Peak to subsequent trough)

So the AAC based conservative portfolio no only delivers better returns but also reduces maximum drawdown dramatically, compared with a buy and hold stock portion portfolio like Schwab Conservative Total Return Dividend Portfolio.

Retirees can customize MPIQ Core ETFs Asset Allocation Composite Conservative using their own personal risk profile to adjust to their specific situations.

Market overview

Stocks continued to be volatile because of the deteriorating coronavirus outbreak in China. Earnings wise, Factset reports that after 45% of the companies in the S&P 500 reported their Q4 earnings, the blended result as of last Friday was -0.3%, better than the expected -1.6% on December 31.

Whether the coronavirus epidemic could eventually become a black swan to induce a global recession is still hard to see. Regardless, in this overly extended and very overvalued market, we call for staying the course and adopting a more tactical strategy.

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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