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, May 2, 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.
Performance Comparison Between Strategic And Tactical Allocation
We have discussed several times on the recent performance of the tactical and strategic asset allocation based portfolios. The following are the two recent reviews:
- March 14, 2016: Are Tactical And Timing Strategies Losing Steam?
- January 4, 2016: What Worked And Didn’t In 2015
We have pointed out that the underperformance of our portfolios, compared with US stocks and US stocks/US bonds balance portfolios, is mostly due to their exposure in international stocks. Indeed, most global balanced allocation mutual funds and portfolios provided by other parties including robo advisors have suffered recently. Furthermore, when compared with these portfolios, our portfolios have fared well, if not better.
In this newsletter, we will compare the performance of our strategic and tactical portfolios. The purpose is to understand the nature of these portfolios.
Strategic vs. Tactical Portfolios
We look at the first two tables on our Brokerage Investors page (What We Do -> Brokerage Investors):
Latest Brokerage Specific ETF Tactical Portfolio Performance Comparison
| Ticker/Portfolio Name | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR |
|---|---|---|---|---|---|
| Fidelity Commission Free ETFs Tactical Asset Allocation Moderate | 3.0% | -4.6% | 2.1% | 4.4% | 7.1% |
| Schwab Commission Free ETFs Tactical Asset Allocation Moderate | 4.7% | -0.1% | 3.8% | 3.7% | |
| TD Ameritrade Commission Free ETFs Tactical Asset Allocation Moderate | 4.1% | -3.5% | 2.8% | 4.1% | 6.0% |
| Vanguard Liquid ETFs Tactical Asset Allocation Moderate | 1.8% | -4.8% | 2.6% | 4.7% | 7.7% |
| Etrade All Star ETFs Tactical Asset Allocation Moderate | 4.5% | -3.0% | 3.3% | 5.3% | 8.8% |
| Six Core Asset ETFs Tactical Asset Allocation Moderate | 1.9% | -4.2% | 3.3% | 3.4% | 8.0% |
| MyPlanIQ Diversified Core Allocation ETF Plan Tactical Asset Allocation Moderate | 3.0% | -3.2% | 3.1% | 3.9% | 8.1% |
| Retirement Income ETFs Tactical Asset Allocation Moderate | 1.0% | -5.1% | 1.6% | 4.2% | 7.7% |
**YTD: Year to Date
Latest Brokerage Specific ETF Strategic Optimal Portfolio Performance Comparison
| Ticker/Portfolio Name | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR |
|---|---|---|---|---|---|
| Fidelity Commission Free ETFs Strategic Asset Allocation – Optimal Moderate | 2.4% | -0.5% | 3.4% | 4.7% | 4.7% |
| Schwab Commission Free ETFs Strategic Asset Allocation – Optimal Moderate | 2.2% | -2.8% | 2.8% | 3.0% | |
| TD Ameritrade Commission Free ETFs Strategic Asset Allocation – Optimal Moderate | 1.5% | -4.1% | 2.4% | 2.3% | 3.2% |
| Vanguard Liquid ETFs Strategic Asset Allocation – Optimal Moderate | 0.6% | -2.9% | 3.7% | 3.8% | 4.3% |
| Etrade All Star ETFs Strategic Asset Allocation – Optimal Moderate | 1.4% | -3.9% | 2.4% | 3.4% | 4.6% |
| Six Core Asset ETFs Strategic Asset Allocation – Optimal Moderate | 1.6% | -3.4% | 3.1% | 3.9% | 4.3% |
| MyPlanIQ Diversified Core Allocation ETF Plan Strategic Asset Allocation – Optimal Moderate | 2.3% | -1.8% | 3.2% | 3.7% | 4.7% |
| Retirement Income ETFs Strategic Asset Allocation – Optimal Moderate | 2.7% | -0.9% | 3.7% | 4.9% | 5.1% |
**YTD: Year to Date
These portfolios are ETF based. Since all ETFs are index ETFs, the comparison eliminate the bias of actively managed funds that sometimes can have large impact on performance.
So far this year, the tactical portfolios have done better than the strategic portfolios in most cases. The same difference actually extends beyond year to date.
Tactical better strategic portfolios in longer terms
We construct the following table based on the above table in order to see the difference in the last 5 years and 10 years (SAA: Strategic Asset Allocation, TAA: Tactical Asset Allocation):
| SAA 5Yr | TAA 5 Yr | 5Yr Diff | SAA 10 Yr | TAA 10 Yr | 10 Yr Diff | |
| Fidelity | 4.70% | 4.40% | 0.30% | 4.60% | 7.10% | -2.50% |
| Schwab | 3.00% | 3.70% | -0.70% | 0.00% | ||
| TDAmeritrade | 2.30% | 4.20% | -1.90% | 3.20% | 6.20% | -3.00% |
| Vanguard | 3.80% | 4.70% | -0.90% | 4.30% | 7.70% | -3.40% |
| Etrade | 3.40% | 5.30% | -1.90% | 4.60% | 9.00% | -4.40% |
| Six Core | 3.90% | 3.40% | 0.50% | 4.30% | 8.00% | -3.70% |
| MyPlanIQ Core | 3.70% | 3.90% | -0.20% | 4.70% | 8% | -3.30% |
| Retirement Inc | 4.90% | 4.20% | 0.70% | 5.10% | 7.70% | -2.60% |
| Average Difference | -0.51% | -2.86% | ||||
Though many users have an impression that strategic portfolios have done ‘better’ for the past several years, the performance difference for the past 5 years indicates otherwise! Notice that the past 5 year performance of most portfolios is the live performance, not the back test performance as we first went live in 2010. Again, this wrong impression stems from the strength of US stocks for the past several years in this cycle. However, international and emerging market stocks actually have had very anemic if not dismal performance for the past 5 years:
| Ticker/Portfolio Name | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR |
|---|---|---|---|---|---|
| VNQ (Vanguard REIT ETF) | 4.9% | 2.7% | 9.0% | 11.0% | 6.4% |
| VTI (Vanguard Total Stock Market ETF) | 1.0% | -0.2% | 11.3% | 10.9% | 7.0% |
| VEA (Vanguard FTSE Developed Markets ETF) | -3.8% | -9.9% | 2.3% | 1.8% | |
| VWO (Vanguard FTSE Emerging Markets ETF) | 4.9% | -14.8% | -4.3% | -4.7% | 2.7% |
| DBC (PowerShares DB Commodity Tracking ETF) | -2.1% | -24.7% | -21.8% | -15.7% | -5.2% |
For the 10 year performance, all TAA portfolios have done better than their SAA counterparts by some significant margins: close to 3% annually. The large difference is mostly due to the big loss of the SAA portfolios during the financial crisis in 2008-2009.
Comparison with other global funds and portfolios
In the following table, we compare our SAA/TAA portfolios with a few global allocation funds and portfolios:
Portfolio Performance Comparison (as of 4/4/2016):
| Ticker/Portfolio Name | YTD Return** |
1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR |
|---|---|---|---|---|---|
| Wealthfront Moderate Portfolio | 2.1% | -3.0% | 3.4% | 3.8% | |
| 7Twelve Original Portfolio | 2.7% | -6.7% | 1.7% | 2.4% | 4.3% |
| MyPlanIQ Diversified Core Allocation ETF Plan Tactical Asset Allocation Moderate | 3.0% | -3.2% | 3.1% | 3.9% | 8.1% |
| MyPlanIQ Diversified Core Allocation ETF Plan Strategic Asset Allocation – Optimal Moderate | 2.3% | -1.8% | 3.2% | 3.7% | 4.7% |
| MALOX (BlackRock Global Allocation Instl) | -0.9% | -4.8% | 3.7% | 3.4% | 5.4% |
| GBMFX (GMO Benchmark-Free Allocation III) | 0.2% | -5.5% | 1.4% | 3.8% | 5.3% |
| PASDX (PIMCO All Asset D) | 4.1% | -6.3% | -1.8% | 1.7% | 3.9% |
| RIRGX (American Funds Capital Inc Bldr R6) | 2.9% | -1.3% | 5.4% | 6.7% |
Other than RIRGX (American Funds Capital Inc Bldr R6), our portfolios have done better than other portfolios and funds. American Funds Capital Income Builder (RIRGX) is a very popular allocation fund among financial advisors (you have to purchase an American Funds mutual fund through a financial advisor or a retirement plan). Based on Morningstar, its allocation is:
Not only the fund has overweighted US stocks, its bond and cash allocation is about 20%, which should be really compared with our growth allocation portfolio. In 2008, the portfolio (RIRFX, the R5 class as R6 didn’t exist at that time) lost 30%, compared with -25% loss of MyPlanIQ Diversified Core Allocation ETF Plan Strategic Asset Allocation – Optimal Moderate.
Market Overview
US stocks are now in a positive trend. However, developed country stocks are still in red year to date (-3.2% for VEA). It’s somewhat surprising that emerging market stocks have staged a strong rally year to date (5.6% year to date and 9% in 13 weeks for VWO). Markets are again tilted to the risk on mode. However, global economy and corporate earnings are still in a very mixed picture. We still maintain our caution.
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 6 years. Since the financial crisis in 2008-2009, we have not seen substantial structural change in the U.S., European and emerging market economies. Even though U.S. stocks have had a recent correction, their valuation is still at a historical high level. It is thus not a good time to take excessive risk.
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
- 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
- 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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