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 Wednesday September 1, 2021. 

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.

Best Global Allocation Funds vs. MyPlanIQ ETF Portfolios

We continue our regular reviews on various styles of portfolios. In the past, we looked at the following:

In this newsletter, we want to compare our ‘default’ MPIQ ETF portfolios with some of the best rated global allocation funds.

Morningstar Gold/Silver rated global allocation funds

Global allocation funds are those that can have flexible stock and bond allocations to various countries and regions. Morningstar has a separate category called ‘World Allocation’. Morningstar fund screener lists the following gold and silver rated funds (after deleting different fund classes of a fund): 

Table 1: Global allocation funds performance  (as of 8/6/2021):
Ticker/Portfolio Name MS Rating YTD
1Yr AR 3Yr AR 5Yr AR 10Yr AR 15Yr AR
MPIQ ETF Allocation Moderate N/A 12.5% 23.2% 13.9% 11.4% 10.2% 9.5%
RIRFX (American Funds Capital Inc Bldr R5) Gold 10.1% 19.3% 8.2% 7.2% 7.8% 6.1%
RGBCX (American Funds Global Balanced R3) Gold 6.7% 15.8% 8.7% 7.4% 7.2%  
VGWAX (Vanguard Global Wellington Admiral) Silver 9.2% 19.6% 10.3%      
LGMAX (Loomis Sayles Global Equity and Income A) Silver 11.1% 19.9% 13.6% 13.0% 10.2% 9.6%
RPGAX (T. Rowe Price Global Allocation) Silver 8.7% 21.4% 11% 10.3%    
SGIIX (First Eagle Global I) Silver 11.1% 21.9% 10.1% 8.7% 8.5% 7.9%
MALOX (BlackRock Global Allocation Instl) Silver 1.6% 14.0% 10.1% 8.9% 7.1% 6.7%
GAOSX (JPMorgan Global Allocation) Silver 7.4% 21.5% 10.6% 9.8%    
DGSIX (DFA Global Allocation 60/40 I) No rating 10.5% 22.4% 10.1% 9.7% 8.5% 6.8%


  • The only two Gold rated funds are both from American Funds family. American Funds funds are mostly available in 401k plans and in financial advisors managed portfolios. These funds have some of the best records for a long enough history. 
  • Funds from Loomis, First Eagle and BlackRock are some of our long term favorites and we have featured them many times. 
  • Morningstar rated three relatively new funds Vanguard Global Wellington, T.Rowe Price and JPMorgan ones because of their managers who have managed other best rated allocation funds. For example, Vanguard Global Wellington is managed by the same managers for well known Vanguard Wellington (VWELX) fund that’s basically a moderate/conservative allocation fund more focused on US stocks and bonds. 
  • For global allocation funds, the ‘standard’ 60/40 stocks/bonds mix benchmark is DFA Global Allocation 60/40 (DGSIX). It’s also included in the above table for comparison purpose. This fund, like American Funds funds, can only be accessed from financial advisors. 

As always, it’s not surprising that even these best rated funds have a hard time to outperform the simple DFA index fund DGSIX. In fact, both Gold rated American Funds funds underperformed DGSIX for the past 1, 3, 5, 10 and/or 15 years. This is yet another strong evidence to support the ‘simpler index fund’ approach. 

MPIQ ETF Allocation Portfolios

The MPIQ ETF Allocation Portfolios are now default portfolios for our subscribers. For a paid subscriber. you can always find two ETF portfolios listed on your Dashboard when you login to your account. 

You can find more info on MPIQ ETF Allocation Moderate by visiting What We Do > Brokerage Investors page. You can find, for example, the following daily updated return table: 

Ticker/Portfolio Name YTD
1Yr AR 3Yr AR 5Yr AR 10Yr AR 15Yr AR
MPIQ ETF Allocation Moderate 12.5% 23.2% 13.9% 11.4% 10.2% 9.5%
VBINX (Vanguard Balanced Index Inv) 10.3% 20.2% 13.3% 11.8% 11.0% 8.6%
DGSIX (DFA Global Allocation 60/40 I) 10.5% 22.4% 10.1% 9.7% 8.5% 6.8%
VT (Vanguard Total World Stock ETF) 14.5% 32.3% 14.1% 14.2% 11.5%  

MPIQ ETF Allocation Moderate has the following properties:

  • It can invest up to 60% in stocks
  • Its stock allocation breakdowns are mostly similar (but can change in the future as we see fit) to the one proposed by the late Yale Endowment fund manager David Swensen. These include US stocks, US REITs, international stocks and emerging market stocks. 
  • Its stock allocation can go to 0 when stocks are in a downtrend. The decision is governed by our  Asset Allocation Composite (AAC) strategy. This strategy relies on the trends of major asset (US stocks, international stocks and bonds), economic indicators and market internals to assess whether risk assets (i.e. stocks) are in a downtrend and thus it’s more favorable to reduce stock exposure to avoid large loss in those situations. 
  • It utilizes the same algorithm to select bond ETFs for bond part of allocation as that used in MPIQ ETF Fixed Income.  This portfolio has consistently better than other fixed income funds. 

Outperforming the best global allocation funds

Let’s focus on the following table that picks the ‘best’ funds from Table 1: 

MPIQ portfolio vs. best global allocation funds (as of 8/6/2021):
Ticker/Portfolio Name Maximum Drawdown 1Yr AR 3Yr AR 5Yr AR 10Yr AR 15Yr AR Since Inception
MPIQ ETF Allocation Moderate 13.2% 23.2% 13.9% 11.4% 10.2% 9.5% 9.4%
RIRFX (American Funds Capital Inc Bldr R5) 43.1% 19.3% 8.2% 7.2% 7.8% 6.1% 7.1%(9.1%)*
LGMAX (Loomis Sayles Global Equity and Income A) 48.5% 19.9% 13.6% 13.0% 10.2% 9.7% 9%(9.4%)**
SGIIX (First Eagle Global I) 37.1% 21.9% 10.1% 8.7% 8.5% 7.9% 10.6%(8.5%)***

*: RIRFX inception date: 6/10/2002. Parenthesis is MPIQ ETF portfolio Annualized Return (AR) from the same date 

**:LGMAX inception date: 2/2/2006. Parenthesis is MPIQ ETF portfolio Annualized Return (AR) from the same date 

***: SGIIX inception date: 7/31/1998. Only compared with date from 12/31/2000 (MPIQ ETF portfolio start date)

Maximum Drawdown: peak to a subsequent trough loss


  • Only First Eagle Global SGIIX was able to outperform MPIQ ETF Allocation Moderate portfolio since 12/31/2000 (the portfolio’s start date). Even for this, we would like to point out that most candidate ETFs in the portfolio were not available in early 2000s. In fact, MPIQ portfolio has outperformed SGIIX for the past 1, 3, 5, 10 and 15 years. We thus believe the underperformance since the inception is mostly due to missing ETFs in early years. 
  • LGMAX was able to outperform our portfolio for the past 15 years and 5 years. This is impressive. We attribute the outperformance to its ‘bold’ exposure in high yield bonds in their bond portfolio. Indeed, such aggressive low quality (high yield) bond exposure also makes the fund subject to the largest peak to trough maximum drawdown. Note that MPIQ ETF portfolio’s maximum drawdown is only about 1/3 of this fund. This is certainly a big risk reduction. 

The outperformance can be most attributed to the two parts:

  • Tactical or dynamic stock exposure: our AAC strategy was able to avoid large loss in 2008 and 2020 (see the above chart on LGMAX vs. MPIQ portfolio). We view this capability is even more crucial in the coming years, given current ultra high stock and bond prices (valuations). 
  • Our fixed income bond ETF selection algorithm has outperformed even the best bond/fixed income funds (see June 14, 2021: Outperform The Best Performing PIMCO Income Bond Fund). This is important as it’s increasingly difficult to outperform from the stock/equity investment side and the fixed income portion can materially make a big difference. 
  • Of course, the portfolio’s overweight in US stocks has helped to some extent too, compared with other global funds that might or might not have the same US stock exposure. At this moment, given the current pandemic and global trade friction, it’s still hard to see whether international stocks and emerging market stocks can outperform US stocks in the near future. 

In a word, our tactical allocation and good fixed income fund selection algorithm have played important roles in outperforming best global allocation funds. 

Market Overview

The impressive earnings surprise continue: last week, with 89% S&P 500 companies reporting on Q2 earnings, the blended year over year growth rate was 88.8%, better than 85.1% a week earlier, better than 74.2% two weeks ago, better than 69.3% before and 63.3% expected on June 30, 2021 (see Factset). Meanwhile, investors are adopting wait and see attitude on the possible Covid pandemic worsening situation. For now, the general consensus seems to be that the pandemic wouldn’t affect the economy recovery as much as before. 

Even though large cap stock indexes like S&P 500 and Nasdaq 100 were again all time high last week. Both mid cap and small cap stocks still struggled to break out their ranges. So the divergence continues. 

We reiterate our caution on the current markets and advocate the following practice:

  • For strategic allocation (buy and hold) investors, ignore the current market behavior. Remember, as what we have emphasized numerous times, when you choose and commit to a strategic portfolio, you essentially know and commit that your investment horizon (or the time you need to utilize this capital) is 20 years or longer. As we pointed out, if your investments are those diversified (index) funds such as an S&P 500 index fund (VFINX, for example), you know your money is in some solid ‘business’ that eventually (20 years later) will deliver some reasonable returns. As long as you are comfortable with this thesis, you should sit tight and forget about the current gyration.
  • For tactical investors, again, you have to ignore the current market noise. Furthermore, you should follow your strategy rigorously, especially in a time like this. Human emotion, both optimistic and pessimistic, and human desire, both greedy and fearful, are your worst enemies. This has been shown to be true time and time again.

Stock valuation is still extremely high by historical standard. For the moment, we believe it’s prudent to be cautious while riding on market uptrend. However how serious a correction might be, we have confidence in the US economy in the long term and thus in the stocks in aggregate. We just need to manage through interim losses carefully.  

We again would like to emphasize that 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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