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 Monday November 2, 2020.

Please note: As of March 1, 2020, we officially phased out our old rebalance calendar for both SAA and TAA. They are now always rebalanced on the first trading day of a month. 

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.

Recent Improvements

As always, we have continuously improved our portfolios and services. This newsletter describes some recent improvements. 

Composite market indicator improvement

We have improved our composite market indicator used in our AAC (Asset Allocation Composite ) strategy. Several important economic macro indicators are now incorporated in the indicator. This improvement has enabled us to avoid being overly pessimistic and reduced the impact of  short term market fluctuation on risk exposure. 

Furthermore, this indicator has been incorporated in our TAA (Tactical Asset Allocation) strategy also. In the modified TAA strategy, in addition to asset class and fund momentum score based selection, the composite market indicator is now used to help decide risk asset exposure. 

MyPlanIQ basic ETF portfolios

We continue to simplify our portfolios. We now focus on providing to our basic subscribers (and even experienced ones) a few portfolios. Specifically, we provide the two ETF portfolios to all of our paying subscribers: 

These two portfolios are automatically added to a user’s dashboard. You will find them listed in a portfolio table called ‘MyPlanIQ Basic ETF Portfolios’ on your dashboard: 

If you are a paying subscriber (basic, expert or pro), you are now automatically following these two portfolios and you will receive regular monthly rebalance emails on them. You can unfollow or disable emails if you choose to do so. The two portfolios do not take up a subscriber’s quota. 

The two portfolios are now listed on our Brokerage Investors page and Income Investors page respectively. 

MPIQ ETF Allocation Moderate is based on AAC. It’s a moderate risk portfolio. You can customize a new portfolio using another risk profile that’s suitable for you. 

MPIQ ETF Fixed Income is basically our ETF version of total return bond portfolio. 

The ETF portfolios can be implemented in any major brokerages commission-free. 

Basic subscribers

To summarize, a basic subscriber gets

  1. For brokerage investments (IRA or taxable): they automatically follow MPIQ ETF allocation and fixed income portfolios. For those who prefer mutual funds, they also get to follow total return bond mutual fund portfolios (listed on Income Investors page). 
  2. For retirement 401k or other plans, they can search for their plans (see retirement plan page)  and then customize a portfolio with personal risk profile to follow. 
  3. We discourage basic subscribers to use other portfolios and over time, we will stop updating/improving the candidate funds (plans) for these portfolios. 
  4. A simplified flow is to always go through our ‘Get Started Now‘ flow to pick/customize a model portfolio. 

The reason to make the above change is to simplify our offerings so that average users can easily pick portfolios to follow. Furthermore, it also allows us to devote our efforts to these few portfolios and improve them. 

Expert/pro subscribers

We would like to alert our expert and pro subscribers that we will no longer actively update brokerage plans other than the ones mentioned above. These users should consider to create personal plans if they believe the plans (i.e. candidate funds) need to be updated. Frankly, most of these plans were developed for research and comparison purposes and we don’t believe they are suitable for many investors. 

As stated, in addition to AAC based portfolios, expert subscribers can create TAA and SAA optimal based portfolios. Regarding TAA portfolios, we believe for experienced investors,  these portfolios are an alternative to AAC portfolios. Longer terms, as TAA portfolios select best performing asset classes, they might be able to outperform AAC based portfolios in periods when foreign stocks outperform US stocks. Of course, this comes with the expense of more active rebalancing/trading. 

The following is a sample comparison between the old TAA portfolio and the new TAA portfolio that incorporates the composite market indicator:

Portfolio Performance Comparison (as of 10/23/2020):
Ticker/Portfolio Name YTD
Return**
1Yr AR 3Yr AR 5Yr AR 10Yr AR 15Yr AR
Google Inc. 401(k) Savings Plan Tactical Asset Allocation Moderate 6.6% 9.9% 8.8% 7.7% 7.4% 9.0%
Google Inc. 401(k) Savings Plan Tactical Asset Allocation Moderate Old 4.6% 6.8% 4.5% 5.0% 5.9% 7.8%

In addition to 401k plan portfolios, expert users can also follow the portfolios listed on Advanced Strategies. These portfolios have been updated using our improved composite market indicator.  As we have streamlined our offerings, we will also focus our efforts on those portfolios in the ‘Practical Advanced Portfolios’ section. We believe these portfolios can offer higher returns in longer terms with the expense of more active trading and/or volatility. 

We will discuss and extend some of these portfolios in the coming newsletters. 

Market overview

As we are closing to the US election date, stocks have started to experience volatile fluctuation. Though stocks have done well with the ultra loose monetary and strong fiscal policy support, investors should not have delusion that they are free of large loss. In fact, the opposite is more likely true as we now see:

  • The Covid 19 pandemic is now in the second or third wave. This might or might not seriously affect the economy, depending on how serious it becomes. 
  • The current fiscal stimulus negotiation is still stuck in the congress. 
  • The over-extended, non-uniform (more or less large tech companies driven) stock rise at a historical very expensive valuation level 

Again, we are seeing both S&P 500 equal weight (RSP) and small cap Russell 200 ETF (IWM) have not been able to breach their February highs: 

Investors shouldn’t be complacent on the markets. As always,  we should follow our strategies to navigate through this period:

  • 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 now reached another high. 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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