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.

Total Return Bond Fund Portfolios: Where Do They Fit?

We often received questions regarding our total return bond fund portfolios (see those listed on What We Do -> Brokerage Investors page). Users are especially interested in where these portfolios fit in, compared with various types of bond funds. In this newsletter, we will compare them with representative funds in popular categories. 

First, let’s look at their recent performance, compared with the popular total return bond funds: 

Recent performance

Performance Comparison (as of 8/28/2017)
Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 10Yr AR 10Yr Sharpe
Schwab Total Return Bond 5.9% 5.6% 3.3% 5.8% 8.3% 1.81
DLTNX (DoubleLine Total Return Bond N) 2.5% 0.7% 2.5% 2.9%    
LSBRX (Loomis Sayles Bond Retail) 6.7% 5.5% 1.7% 4.5% 5.9% 1.02
PONDX (PIMCO Income D) 5.2% 7.9% 5.2% 7.2% 9.0% 2.14
PTTDX (PIMCO Total Return D) 4.9% 2.7% 2.7% 2.5% 5.6% 1.28
MWTRX (Metropolitan West Total Return Bond M) 2.9% 0.3% 2.2% 3.0% 5.7% 1.38

So far this year, the portfolio has done well enough, only behind LSBRX (Loomis Sayles Bond Retail), which overweights in low quality junk bonds. 

We note that PONDX (PIMCO Income D) is the only one that outperformed the portfolio in the past 10 years. This fund has been remarkable since its inception in 2007. However, as we have emphasized many times, our portfolios are designed to perform competitively while in the meantime to have downside protection in case one of the star candidate funds falters. We have seen this before: for example, from 12/31/2000 to 12/31/2007, LSBRX was practically ahead of the portfolio almost every year. However, it incurred a big loss in 2008 that has severely affected its returns. 

How are the total return bond fund portfolio compared with intermediate bond funds

It’s an easier comparison with representative intermediate bond funds: 

Portfolio Performance Comparison (as of 8/28/2017)
Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 10Yr AR 10Yr Sharpe
Schwab Total Return Bond 5.9% 5.6% 3.3% 5.8% 8.3% 1.81
VFICX (Vanguard Interm-Term Invmt-Grade Inv) 4.1% 1.2% 3.4% 3.3% 5.5% 1.06
VFITX (Vanguard Interm-Term Treasury Inv) 2.6% -0.6% 2.2% 1.4% 4.3% 0.82
VBIIX (Vanguard Interm-Term Bond Index Inv) 4.2% 0.1% 3.0% 2.6% 5.4% 0.9
VBMFX (Vanguard Total Bond Market Index Inv) 3.2% 0.0% 2.5% 2.1% 4.3% 0.99

The portfolio did better than virtually every of these funds in last 3, 5, and 10 year periods (except that it was a bit lower 3.3% vs. 3.4% than VFICX in the last 3 years). This should be expected as that is the purpose of these portfolios. 

But how about risky bond funds such as high yield bond funds and global (international) bond funds? 

Portfolio Performance Comparison (as of 8/28/2017)
Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 10Yr AR 10Yr Sharpe
Schwab Total Return Bond 5.9% 5.6% 3.3% 5.8% 8.3% 1.81
VWEHX (Vanguard High-Yield Corporate Inv) 5.3% 7.2% 4.8% 5.8% 6.9% 1.3
TGBAX (Templeton Global Bond Adv) 2.7% 10.5% 0.9% 3% 6.6% 0.34

So, even if you attempt to have exposure in highly risky junk (high yield) bonds, it looks like there is no point to have this stand alone exposure as the portfolio has done better than a high yield bond fund like VWEHX because it can tactically invest in these bonds (through funds like Loomis Sayles LSBRX, PIMCO Income PONDX, for example). 

Templeton Global Bond fund TGBAX is an excellent global bond fund that can sizably invest anywhere including emerging market bonds. Again, because our total return bond funds can also dabble into foreign bonds (for example, PIMCO total return bond fund PTTDX or DoubleLine DLTNX are known to invest in foreign bonds), the portfolio outdid these global bond funds. 

How about short term bond funds?

It’s tempting to treat these total return bond fund portfolios as short term investments. Let’s take a look: 

We can see the portfolio lost in 3 years in the last 16+ years. As we stated in our recent newsletter July 24, 2017: Total Return Bond Fund Portfolios And Cash, the total return bond fund portfolios should be held for more than 2 years to at least smooth out their volatilities. They are not qualified to be treated as a short term bond fund replacement. 


Other than short term cash, total return bond fund portfolios can replace individual holdings of various intermediate bond funds. These portfolios can be treated as the core fixed income holdings in one’s overall investments. 

Market Overview

Stocks continue to defy many investors (us included) and hang in near their historical highs. International and emerging market stocks are still showing strength while US stocks are showing some weakness. High yield bonds recovered. For now, the party continues, albeit showing some fatigue. However, if one looks under the hood more closely, we find the recent markets are more concerning: based on StockCharts, the percentage of stocks in S&P 500 that are above their 200 day moving averages continues to decline: 

Apparently, market health is declining, though not enough to call for adjustment yet. But as we have said all along, this is the time to be cautious and risk averse. 

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. 

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