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, January 19, 2016. You can also find the re-balance calendar for 2015 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.
What Worked And Didn’t In 2015
2015 marked another difficult year for many strategies. First, let’s review returns of major asset classes:
Asset Performance (as of 1/4/2016):
Asset ETF | 2015 | 1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR |
---|---|---|---|---|---|
SPY (SPDR S&P 500 ETF) | 1.3% | -0.1% | 13.5% | 12.1% | 7.0% |
EFA (iShares MSCI EAFE) | -1.0% | -2.1% | 3.0% | 3.1% | 2.6% |
EEM (iShares MSCI Emerging Markets) | -16.2% | -17.4% | -9.5% | -6.0% | 2.5% |
IYR (iShares US Real Estate) | 0.3% | -1.9% | 7.8% | 9.7% | 5.6% |
DBC (PowerShares DB Commodity Tracking ETF) | -27.6% | -27.6% | -21.7% | -13.5% | |
GLD (SPDR Gold Shares) | -10.7% | -10.7% | -14.4% | -6.1% | 7.0% |
BND (Vanguard Total Bond Market ETF) | 0.5% | 0.1% | 1.3% | 3.0% | |
TLT (iShares 20+ Year Treasury Bond) | -1.8% | -1.8% | 2.7% | 8.2% | 6.5% |
In a word, other than the meager returns from US stocks, REITs and US bonds, everything else down. Even for the US assets, only large cap growth and large cap blend stocks (such as those represented by S&P 500 SPY) had positive returns:
US Equity Style Trend
01/04/2016
Description | Symbol | 1 Week | 4 Weeks | 13 Weeks | 26 Weeks | 52 Weeks | Trend Score |
---|---|---|---|---|---|---|---|
Russell Largecap Growth | IWF | -2.36% | -3.45% | 1.96% | -0.73% | 5.59% | 0.2% |
Russell Largecap Index | IWB | -2.04% | -2.95% | 1.34% | -2.65% | 1.09% | -1.04% |
Russell Midcap Growth | IWP | -2.25% | -3.27% | -0.79% | -5.89% | -0.07% | -2.45% |
Russell Smallcap Growth | IWO | -3.62% | -5.22% | -2.21% | -11.23% | -2.12% | -4.88% |
Russell Midcap Indedx | IWR | -1.87% | -2.78% | -1.16% | -6.04% | -2.14% | -2.8% |
Russell Largecap Value | IWD | -1.7% | -2.45% | 0.65% | -4.41% | -3.4% | -2.26% |
Russell Midcap Value | IWS | -1.46% | -2.31% | -1.44% | -6.19% | -4.4% | -3.16% |
Russell Smallcap Index | IWM | -3.47% | -4.76% | -2.46% | -10.45% | -4.87% | -5.2% |
Russell Smallcap Value | IWN | -3.33% | -4.38% | -2.71% | -9.77% | -7.84% | -5.6% |
Similarly, among sectors:
US Sectors Trend
01/04/2016
Description | Symbol | 1 Week | 4 Weeks | 13 Weeks | 26 Weeks | 52 Weeks | Trend Score |
---|---|---|---|---|---|---|---|
Consumer Discretionary | XLY | -2.36% | -4.62% | 0.19% | 0.5% | 10.94% | 0.93% |
Consumer Staples | XLP | -1.87% | -0.7% | 3.21% | 5.03% | 6.59% | 2.45% |
Technology | XLK | -2.2% | -4.2% | 3.96% | 2.67% | 5.93% | 1.23% |
Healthcare | XLV | -1.91% | -0.48% | 3.74% | -4.7% | 5.07% | 0.34% |
Telecom | IYZ | -3.86% | -4.06% | 1.25% | -1.94% | -0.18% | -1.76% |
Financial | XLF | -2.58% | -4.19% | 1.47% | -3.68% | -1.57% | -2.11% |
Industries | XLI | -1.95% | -3.07% | 1.51% | -2.05% | -3.21% | -1.75% |
Utilities | XLU | -0.83% | 2.3% | -0.61% | 3.91% | -4.38% | 0.08% |
Materials | XLB | -2.42% | -4.3% | 1.47% | -9.98% | -7.88% | -4.62% |
Energy | XLE | -0.25% | -2.22% | -7.49% | -16.63% | -18.49% | -9.02% |
Simply put, it is a very divergent market. In fact, if one would removed the four stocks FANG (Facebook, Amazon, Netflix and Google), S&P 500 would be in the red and Nasdaq would have had more than -5% loss:
FANG Stocks Performance (as of 1/4/2016):
Ticker | 2015 | 1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR |
---|---|---|---|---|---|
FB (Facebook Inc Class A) | 34% | 34.1% | 57.8% | ||
AMZN (Amazon.com Inc) | 117.8% | 106.5% | 35.3% | 28.4% | 29.5% |
NFLX (Netflix Inc.) | 134.4% | 120.6% | 100.2% | 33.5% | 40.9% |
GOOG (Google, Inc. Class A) | 44.6% | 44.2% | 2.4% | 4.8% |
Strategic Asset Allocation
As discussed in December 7, 2015: Diversification And Global Allocation, global allocation portfolios or funds have all encountered difficulties:
Portfolio Performance Comparison (as of 01/04/2016):
Ticker/Portfolio Name | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR |
---|---|---|---|---|---|
7Twelve Original Portfolio | -1.0% | -8.3% | 1.2% | 2.7% | 4.3% |
P David Swensen Yale Individual Investor Portfolio Annual Rebalancing | -1.0% | -1.3% | 7.1% | 8.1% | 6.9% |
Six Core Asset ETFs Strategic Asset Allocation – Equal Weight Moderate | -0.9% | -4.5% | 0.4% | 2.2% | 4.2% |
Six Core Asset ETFs Strategic Asset Allocation – Optimal Moderate | -1.0% | -2.7% | 3.0% | 4.1% | 4.6% |
MALOX (BlackRock Global Allocation Instl) | -0.78% | -1.6% | 4.4% | 4.3% | 5.9% |
GAL (SPDR® SSgA Global Allocation ETF) | -1.03% | -2.8% | 4.6% | ||
VBINX (Vanguard Balanced Index Inv) | -0.86% | -1.1% | 8.1% | 8.3% | 6.3% |
Again, the more balanced allocation is (such as the Six Core Equal Weight portfolio), the worse the performance is for 2015.
David Swensen’s lazy portfolio continued to perform well, mostly due to its heavy exposure in REITs and hedged with long term Treasury bonds.
Tactical Asset Allocation
2015 is no doubt a difficult year for tactical asset allocation portfolios or funds. This is especially true for trend following portfolios such as MyPlanIQ’s Tactical Asset Allocation(TAA) portfolios:
Portfolio Performance Comparison (as of 1/4/2016):
Ticker/Portfolio Name | 1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR | 10Yr Sharpe |
---|---|---|---|---|---|
Six Core Asset ETFs Tactical Asset Allocation Moderate | -5.6% | 3.3% | 3.7% | 8.4% | 0.76 |
GDAFX (Goldman Sachs Dynamic Allocation A) | -7.8% | -0.7% | 1.0% | ||
GBMFX (GMO Benchmark-Free Allocation III) | -4.3% | 2.5% | 4.2% | 5.7% | 0.63 |
PASDX (PIMCO All Asset D) | -10.8% | -3.5% | 1.0% | 3.3% | 0.31 |
GMOM (Cambria Global Momentum ETF) | -8.5% | ||||
GTAA (AdvisorShares Morg Crk Glbl Tacticl ETF) | -8.5% | -1.4% | -1.1% |
See detailed year by year comparison >>
The under performance for this class of portfolios can be mostly attributed to the trendless markets, especially among U.S. stocks, REITs and US dollar driven international stocks:
This is a classic sideway/whip-saw market that has frustrated the trend following strategy. 2015 is actually one of the worst years since 2009 for many TAA portfolios. For example, for P Goldman Sachs Global Tactical Include Emerging Market Diversified Bonds, 2015 has the worst maximum drawdown since 2007. It has the first ever negative annual return since 2997 when the portfolios back testing starts. Similarly, it also has the first ever negative Sortino ratio. It is not an understatement that 2015 is the worst year for this portfolio (in fact, for many TAA portfolios) since late 1990s.
1 Yr | 3 Yr | 5 Yr | 10 Yr | Inception | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
AR(%) | -7.0 | 5.5 | 7.3 | 11.2 | 14.4 | -5.2 | 10.7 | 14.4 | 11.2 | 8.2 | 11.0 | 21.0 | 2.4 | 22.9 |
SR | -0.73 | 0.57 | 0.72 | 0.82 | 1.14 | -0.54 | 1.35 | 1.34 | 1.55 | 0.6 | 0.64 | 1.38 | 0.13 | 1.16 |
DD(%) | 13.6 | 13.6 | 13.6 | 16.6 | 16.6 | 13.6 | 6.1 | 10.7 | 4.5 | 10.4 | 13.1 | 7.3 | 13.2 | 12.1 |
SD(%) | 9.7 | 9.5 | 10.1 | 12.7 | 11.5 | 9.7 | 7.9 | 10.7 | 7.2 | 13.8 | 17.0 | 15.1 | 11.2 | 17.1 |
SR2 | -0.96 | 0.78 | 0.99 | 1.15 | 1.61 | -0.72 | 1.88 | 1.85 | 2.26 | 0.83 | 0.9 | 2.06 | 0.18 | 1.58 |
Yield(%) | 3.32 | 3.5 | 3.96 | 4.35 | 4.74 | 3.28 | 4.35 | 2.83 | 4.69 | 4.55 | 3.26 | 6.65 | 3.77 | 7.13 |
Observations
As much as one can attribute the under performance to the fault of the strategies, we believe the behaviors of major asset classes, our portfolios and many asset allocation funds, are pointing to an inflection point in markets:
- Stocks, especially US stocks, are at an elevated valuation level. How much further markets can still rise up before they undergo a big correction or a bear market is up to debate. However, we are just getting increasingly closer to a point to do so.
- US and Europe have been muddled through using loose monetary policies for so long. Now that US has started its to raise rates, markets have lost their strong psychological support.
- China is perhaps the biggest known threat to global markets: its high debt burden, extremely overvalued real estate market, ongoing currency devaluation, tight labor market and contracting/slowing exports are presenting the biggest challenge for its government to tackle.
No one can predict for certainty where the markets are going. However, if history is of any guide, such muddling can not last forever and will soon be resolved.
Market Overview
The New Year began with a big thud: Chinese stock market hit its circuit breaker and halted trading after 7% loss. This caused a chain effect across global stock markets. However, for us, this is not surprising: as what we commented above, markets are fragile and laden with many accidents waiting to happen. For now, trends of most risk assets are decidedly negative.
For more detailed asset trend scores, please refer to 360° Market Overview.
We would like to remind our readers that markets are more precarious now than other times in the last 5 years. It is a good time and imperative to adjust to a risk level you are comfortable with right now. However, recognizing our deficiency to predict the markets, we will stay on course.
We again copy our position statements (from previous newsletters):
Our position has not changed: We still maintain our cautious attitude to the recent stock market strength. Again, we have not seen any meaningful or substantial structural change in the U.S., European and emerging market economies. However, we will let markets sort this out and will try to take advantage over its irrational behavior if it is possible.
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.
Latest Articles
- 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
- July 6, 2015: Fixed Income Total Return Bond Funds In Strategic Asset Allocation Portfolios
- June 29, 2015: Core ETF Commission Free Portfolios
- June 22, 2015: Secular Asset Trends
- June 15, 2015: Giving Up Bonds?
- June 1, 2015: Summer Blues?
- May 26, 2015: Cash, Bonds and Stocks In A Rising Rate Environment
- May 18, 2015: Portfolio Update
- May 11, 2015: Pain in Fixed Income?
- May 4, 2015: The Balanced Stock and Long Term Treasury Bond Portfolios
- April 27, 2015: Long Term Treasury Bond Behavior
- April 20, 2015: 529 College Savings Plan Rebalance Policy Change
- April 13, 2015: Total Return Bond Funds As Smart Cash
- April 6, 2015: The Low Return Environment
- March 30, 2015: Brokerage Specific Core Mutual Fund Portfolios 2
- March 23, 2015: Investment Arithmetic for Long Term Investments
- March 16, 2015: Brokerage Specific Core Mutual Fund Portfolios
- March 9, 2015: Newsletter Collection Update
- March 2, 2015: Total Return Bond ETFs
- February 23, 2015: Why Is Global Tactical Asset Allocation Not Popular?
- February 16, 2015: Where Are Permanent Portfolios Going?
- February 9, 2015: How Have Asset Allocation Funds Done?
- February 2, 2015: Risk Management Everywhere
- January 26, 2015: Composite Portfolios Review
- January 19, 2015: Fixed Income Investing Review
- January 12, 2015: How Does Trend Following Tactical Asset Allocation Strategy Deliver Returns
- January 5, 2015: When Forecast Fails
- December 22, 2014: Long Term Asset Returns: How Long Is Long?
- December 15, 2014: Beaten Down Assets
- December 8, 2014: Implementing Core Asset Portfolios In a Brokerage
- December 1, 2014: Two Key Issues of Investment Strategies
- November 24, 2014: Holiday Readings
- November 17, 2014: Retirement Spending Portfolios Update
- November 10, 2014: Fixed Income Or Cash
- November 3, 2014: Asset Trend Review
- October 27, 2014: Investment Loss, Mistakes And Market Cycles
- October 20, 2014: Strategic Portfolios With Managed Volatility
- October 13, 2014: Embrace Volatility
- October 6, 2014: Tips For 401k Open Enrollment
- September 29, 2014: What Can We Learn From Bill Gross’ Departure From PIMCO?
- September 22, 2014: Why Total Return Bond Funds?
- September 15, 2014: Equity And Total Return Bond Fund Composite Portfolios
- September 8, 2014: Momentum Based Portfolios Review
- September 1, 2014: Risk & Diversification: Mint.com Interview
- August 25, 2014: Remember Risk
- August 18, 2014: Consistency, The Most Important Edge In Investing: Tactical Case
- August 11, 2014: What To Do In Overvalued Stock Markets
- August 4, 2014: Is This The Peak Or Correction?
- July 28, 2014: Stock Musings
- July 21, 2014: Permanent Portfolios & Four Pillar Foundation Based Framework
- July 14, 2014: Composite Portfolios Review
- July 7, 2014: Portfolio Behavior During Market Corrections
- June 30, 2014: Half Year Brokerage ETF and Mutual Fund Portfolios Review
- June 23, 2014: Newsletter Collection Update
- June 16, 2014: There Are Always Lottery Winners
- June 9, 2014: The Arithmetic of Investment Mistakes
- June 2, 2014: Tips On Portfolio Rebalance
- May 26, 2014: In Praise Of Low Cost Core Asset Class Based Portfolios
- May 19, 2014: Consistency, The Most Important Edge In Investing: Strategic Case
- May 12, 2014: How To Handle An Elevated Overvalued Market
- May 5, 2014: Asset Allocation Funds Review
- April 28, 2014: Now The Economy Backs To The ‘Old Normal’, Should Our Investments Too?
- April 21, 2014: Total Return Bond Investing In The Current Market Environment
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