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, September 5, 2017. 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.
Portfolio Performance: A Walk In The Past
Until recently, our tactical portfolios have been in a dog house for quite some time. However, in the past several months, as international and emerging market stocks have out performed US stocks, the performance of these portfolios have started to pick up. For example, here is the latest performance comparison for our representative tactical portfolio P Goldman Sachs Global Tactical Include Emerging Market Diversified Bonds (listed on Advanced Strategies page):
As of 8/18/2017
Name | YTD* Return |
1Yr AR** |
3Yr AR** |
5Yr AR** |
10Yr AR** |
---|---|---|---|---|---|
P Goldman Sachs Global Tactical Include Emerging Market Diversified Bonds | 13.2% | 12.2% | 4.9% | 8.7% | 9.8% |
VFINX (Vanguard (S&P 500) Index) | 9.7% | 13.1% | 9.3% | 13.6% | 7.5% |
VBINX (Vanguard Balance (60% stocks/40% bonds) | 6.5% | 7.5% | 6.3% | 8.9% | 6.7% |
In fact, we started to see some noticeable activities from our users as some of them are ‘encouraged’ by the recent out performance. This reminds us of the newsletter we wrote two and half years ago. In that newsletter, we quoted a user’s comment on the above portfolio that was all upbeat (and puzzled). Here is some partial quote (see the newsletter for a more complete one):
Why isn’t this strategy, the GS GTAA one mentioned above, known and followed all over the place — by investment advisors, retail and institutional investors at large (outside of myplaniq), and so on? Or maybe it is. But I’m guilty of having read many (too many) investment newsletters, books, and articles over the years — and yet I never heard of this strategy anywhere else except through your site.
Interestingly, we addressed his question right at the start of the underperformance of this portfolio: the portfolio actually went through the worst performance period in its 20+ years back testing history (and live history since 2010).
In fact the best answer to this user’s question is the recent underperformance of this portfolio. The short answer is: no strategy/portfolio can be popular forever as once it has done well, it will go through a period of painful underperformance that will drive away many investors, making it unpopular for sure. However, the cycle will always repeat (of course, that’s based on the assumption that the strategy is a sound one in nature).
As our background has been in computer simulation for so many years, we are a firm believer that walking back in the past can help one to understand the behavior tremendously. This is especially true in investing as a great number of investors either have short term memory or they are just in flux of finding out hot strategies or they are simply new to investing.
So let’s take a walk in the history, assuming we are the ones investing in this portfolio.
A walk in the past
To facilitate the walk, we ask you to imagine being at a particular point of time. Please go slow and dwell at any point of time for some moments. Remember, in real time, days and months are much longer than you see a dot in a chart or a table. Investors will have to endure the unpleasant feelings for days, months or even years when your investments are not doing well, either in an absolute sense (i.e. low returns or even loss) or in a relative sense when compared with a popular market index such as S&P 500. In our case, we are comparing with VFINX (Vanguard (S&P 500) Index).
At a given time, your feelings can vary markedly, depending on whether you just start to invest in this portfolio, or you have followed it for some years. In this exercise, we use 6 months, 1, 3, 5 and 10 years returns for various types of investors. But remember even six-month is already a very long time for many people as their patience or expectation can be as short as a month.
To simplify, we just use yearly data, i.e. we only walk through at the end of a year. Again, this actually compresses or ignores a great deal of interim results in a year (such as monthly data). But we hope just using the year end data would be enough to reveal the nature of the investing (strategy).
The walk
The following is the six month feeling for the past 20 years. Before 2010, virtually at every year end (other than 1998), the investors were very happy. However, there have been a lot of unhappy faces (i.e. the portfolio underperformed VFINX) since 2009. Note that we only use 6 month returns at the end of a year. We actually will get more happy faces from 2009 if we include other 6-month periods. For example, for the past several months, our users will have more happy faces than unhappy ones if they treat themselves as a new 6 month investor.
We also want to point out the smiling face at the end of 2014 (actually at the beginning of 2015): the portfolio outperformed S&P 500 by a large margin: 12.7% vs. 4.3%. But that went quickly to down hill since February 2015. That was the time when the user mentioned at the beginning of this article brought up his positive comment.
Again, we want to point out that if we examine data in more month ends instead of just once a yea, we will see the faces fluctuate more often than the above.
Now, for 1 year walk, we can see that virtually the investors have not been pleased since 2009 every year (and before that, it has been uniformly happy)!
For the 3 year chart, we see that since the end of 2011, the portfolio underperformed at the end of every year (and before that, for 3 year investors, it did better every year since 1998). Similarly, the 5-year investor would have been unhappy since the end of 2013.
However, the long term 10-year investors have had a happy face every year since 2008 (2008 means investing from 1998), albeit they have become less happier every year since 2010. Well, recently it looks like the 10 year return might be better than the end of last year, we will see how it goes at the end of this year.
At this point, many readers might say oh, that’s wonderful, I’m a long term investor and that seems to be a good portfolio/strategy. However, before you jump to this conclusion, we want to remind you to look at the short term charts again in a slow and imaginative manner and truly understand that the past 9 years or so is a very long time. Being able to endure the unhappy faces through these periods is just not an easy feat. No wonder this strategy is unpopular, at least for the past several years.
What’s next?
It amazes us that the portfolio has consistently exhibited a persistent performance outperformance/under-performance behavior, especially for 1, 3 and 5 year periods. We hope the above charts can help investors to better understand the nature of investment strategies. We also recommend readers the previous newsletter July 17, 2017: Long Term Stock Holding Periods For Retirement if you have not read it.
On the other hand, an interesting question is that we are approaching to a 10 year period since the bear market low in 2008/2009. To be precise, a year from now, we will see the 10 year period to start from the lows in 2008. If S&P 500 continues to be at this level (or even slightly lower), we would expect the 10 year return of VFINX (S&P 500) would finally catch up with the portfolio’s. Whether this can materialize or not is anyone’s guess. However, as we have stated numerous times, as US stocks have been at such an elevated valuation level for so long, odds are increasing that they will have a sizable correction in the future.
To summarize, some walk back in the past can be extremely helpful to put things in a bigger perspective. We just hope there are more tools to help to construct the walk easily and more intuitively.
Market Overview
S&P 500 continued its drop last week. August traditionally has been a volatile month. We note that the portfolio based on summer seasonality is now doing better than S&P 500 (see this). Small cap stocks and high yield bonds are also weak. On the other hand, emerging market stocks recovered somewhat last week. Regardless whether the summer weakness is finally upon us or not, risk assets are vulnerable. Recognizing our incapability to better forecast near future movement, we call for staying the course to follow pre-selected strategies.
For more detailed asset trend scores, please refer to 360° Market Overview.
Now that the Trump administration has been in the office for more than half a year, it has stumbled and encountered many difficulties to implement its promised changes in terms of tax cuts, job stimulation and infrastructure spending. On the other hand, stocks continued to ascend, regardless of the progress. Looking ahead, however, we remain convinced that markets will experience more volatilities at some point when reality finally sets in.
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 on 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.
Latest Articles
- August 14, 2017: Fidelity Commission Free ETFs Update
- August 7, 2017: I Didn’t Learn Anything — Mistake vs. Temporary Underperformance
- July 31, 2017: Asset Classes And Fund Choices: A Primer
- July 24, 2017: Total Return Bond Fund Portfolios And Cash
- July 17, 2017: Long Term Stock Holding Periods For Retirement
- July 10, 2017: Half Year Asset Trend Review
- June 26, 2017: How To Beat The Best Balanced Allocation Fund
- June 19, 2017: Newsletter Collection Update
- June 12, 2017: A Mixed Bag Performance of Momentum Investing
- June 5, 2017: How To Start A New Portfolio
- May 29, 2017: Alternative Assets And Their Role In Portfolios
- May 22, 2017: Summer Seasonality And Portfolio Management
- May 15, 2017: Cash: Banking Or Investing?
- May 8, 2017: Holding Period of Long Term Timing Portfolios
- May 1, 2017: Debate on Risk vs. Volatility
- April 24, 2017: The Long Term Stock Market Timing Return Since 1871
- April 17, 2017: Risk vs. Volatility: Long Term Stock Market Returns
- April 10, 2017: Total Return Bond ETFs And Portfolios
- April 3, 2017: Quarter End Asset Trend Review
- March 27, 2017: Practical Consideration For IRAs And 401k Accounts
- March 20, 2017: Fund Fees: That’s (Still) Outrageous
- March 13, 2017: Long Term Stock Valuation Review
- March 6, 2017: Asset Classes for Retirement Investments
- February 27, 2017: Fidelity Total Bond Fund Review
- February 20, 2017: Long Term Stock Timing Based Portfolios And Their Roles
- February 13, 2017: Alternative Investment Portfolios Review
- February 6, 2017: Tax Free Municipal Bond Investments Review
- January 30, 2017: Brokerage Specific Conservative Portfolios
- January 23, 2017: Fixed Income Portfolio Review
- January 16, 2017: Long Term Trend Following Portfolio Review
- January 9, 2017: Tactical Asset Allocation Review
- January 3, 2017: Strategic Asset Allocation Review
- December 12, 2016: Enhanced Index Funds
- December 5, 2016: Review Of Broad Base Core Mutual Funds For Brokerages
- November 28, 2016: Core Index ETFs Review
- November 21, 2016: International Exposure Of U.S. Large Companies
- November 14, 2016: Asset Trends After The Election
- November 7, 2016: Rising Rate And Current Bond Trend
- October 31, 2016: Economy Power And Long Term Stock Returns
- October 24, 2016: Current Commodity Trend And Managed Futures
- October 17, 2016: Investment Mistakes And Good Or Bad Investment Strategies
- October 10, 2016: Momentum Investing Review
- October 3, 2016: Survey & Feedback
- September 26, 2016: Fixed Income Investing: Actively Managed Funds vs. Index Funds
- September 19, 2016: Stock Investing: Actively Managed Funds vs. Index Funds
- September 12, 2016: Newsletter Update
- September 5, 2016: Overvalued Markets And Long Term Timing Strategies
- August 29, 2016: Your 401K Finally Draws Attention
- August 22, 2016: Inflation Protected Securities TIPS For Current Overvalued Markets
- August 15, 2016: Risk On: Emerging Market Stocks And Small Cap Stocks
- August 8, 2016: Portfolio Construction Using Stock ETFs And Bond Mutual Funds
- August 1, 2016: Adding Value To Your Own Investments
- July 25, 2016: Tactical Asset Allocation Funds Review
- July 18, 2016: Strategic Asset Allocation & Lazy Portfolio Review
- July 11, 2016: Asset Trend Review
- June 27, 2016: Secular Cycles For Tactical And Strategic Investment Strategies
- June 20, 2016: A World of Debt
- June 13, 2016: Managed Futures For Portfolio Building
- June 6, 2016: Newsletter Summary
- May 30, 2016: Swensen Portfolio And Permanent Portfolios
- May 23, 2016: AAII Article And Some Web Changes
- May 16, 2016: The PIMCO (Dis)Advantages
- May 9, 2016: Boost Your Dull Summer Investments
- May 2, 2016: Low Cost Index Fund Investing
- April 25, 2016: Tax Free Municipal Bond Funds & Portfolios
- April 18, 2016: Asset Class Trend Review
- April 11, 2016: Construction of Sound And Conservative Portfolios
- 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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