Tactical Asset Allocation (TAA) // April 2015

Wednesday, April 29, 2015 | Leave a comment

Below are the most up to date allocations for the Tactical Asset Allocation model I’ve written about on the blog.  For those needing a refresher on what TAA is and why I think it’s important as part of an investment plan just click here to revisit the first post.

US Stocks (Vanguard Total Stock Market ETF as proxy)International Stocks (Vanguard Total International Stock Market ETF as proxy)Bonds (Vanguard Total Bond Market ETF as proxy)Real Estate (Vanguard REIT ETF as proxy)Gold (SPDR Gold ETF as proxy)Cash
September 20110%55%7%38%0%
October 20110%62%0%38%0%
November 20110%60%0%40%0%
December 20110%58%0%42%0%
January 20120%71%0%29%0%
February 20124%57%9%30%0%
March 201217%58%12%13%0%
April 201217%55%18%10%0%
May 201216%61%23%0%0%
June 20125%69%26%0%0%
July 201213%61%26%0%0%
August 201213%62%25%0%0%
September 201217%58%25%0%0%
October 201218%55%18%9%0%
November 201221%59%15%5%0%
December 201222%57%17%4%0%
January 201319%54%15%12%0%
February 201325%50%17%8%0%
March 201323%54%19%4%0%
April 201324%52%22%2%0%
May 201320%56%23%1%0%
June 201329%55%15%1%0%
July 201330%50%12%0%8%
August 201330%50%7%0%13%
September 201330%17%50%0%0%3%
October 201327%24%50%0%0%0%
November 201329%21%50%0%0%0%
December 201329%21%50%0%0%0%
January 201430%18%50%0%0%2%
February 201425%15%52%8%0%0%
March 201429%14%51%6%0%0%
April 201430%11%52%4%0%3%
May 201419%13%53%15%0%0%
June 201414%4%69%13%0%0%
July 201416%14%54%16%0%0%
August 201418%10%55%17%0%0%
September 201428%0%57%15%0%0%
October 201421%0%55%24%0%0%
November 201418%0%55%27%0%0%
December 201415%0%56%29%0%0%
January 201511%0%57%30%0%2%
February 201520%0%56%24%0%0%
March 201520%0%55%25%0%0%
April 201515%0%55%30%0%0%

Previous Month Recap

It might seem an odd time to publish an update (this post is just a few days before the start to the new month – and therefore new allocation), but I’ve been off on some travel and want to kick off my return with some catch up posts. 😉

So far in 2015 there has been a change of the guard, so to speak, with all asset classes up just a percent or two, other than International Equities. International is up over 10%, substantially beating all other asset classes.

Unfortunately, since International is still only up a few percent the past 12 months, it still has a long ways to go in having truly good momentum. And as such, it is not quite in my model. Accordingly, we’re just up a couple percent, much like most asset classes. Going into May I suspect International will become a healthy allocation, real estate will drop a lot, and US Equities will be somewhere pretty close to where its been.

YTD the model I publish here is finally doing what it was meant to do, shelter us from volatility. The “balanced” tactical asset allocation is up 2.13% while a simplistic blend of just stocks and bonds is up 1.26%.

Allocation Changes for This Month

There have been very few allocation changes the past few months for the model. It favors Real Estate, with a smaller allocation to US Stocks. Gold and Non-US Stocks have been completely out of the model for a few months or longer. Come May, however, I suspect International Equities will find their way into the allocation. Stay tuned as I’ll be sure to post that update just a few days into the coming month.

Since the model I share here is “balanced” keep in mind it always keeps at least 50% of the portfolio in either bonds or cash.  The whole idea of this balanced tactical asset allocation (TAA) approach is to keep a highly diversified portfolio that can get through the markets major ups and downs without the dizzying volatility of just growth investments.  It’s not perfect, but so far so good.

The model is mechanical, so it takes no lead from my opinions.  My opinion, however, is that stocks will not be able to sustain their current trajectory (forever).  A correction, even if mild, is due sometime in the near future (if not already under way).

Long Term Model Performance Versus Benchmark

For those that want to track the performance of this model here’s the most up to date info:

Balanced Tactical Asset
Allocation Model
50% Total Stock Market
50% Total Bond Market
20056.60%4.31%
200613.33%8.70%
20075.93%4.99%
2008-0.96%-18.99%
200924.21%13.36%
201015.51%8.08%
20110.38%3.33%
20128.10%9.36%
20138.23%12.46%
20145.95%8.64%
2015 (ytd)2.13%1.26%

I’ve also added some long term metrics on return and risk here (complete with data going back to 1997):

Balanced Tactical
Asset Allocation Model
50% Total Stock Market
50% Total Bond Market
Annualized Return
(6/1997 to 1/2015)
9.92%6.79%
Risk
(5 Yr Standard Deviation)
6.76%5.71%
Best Month4.84%5.85%
Worst Month-4.64%-10.06%

To see how performance is measured just check out the static page on TAA here. **Note** I only update the long term metrics quarterly versus monthly like the other tables above.

As mentioned in past posts I’ll update this model/strategy each month roughly 1 week into each new month.  This way scalpers can’t just steal the research as their own and other financial professionals can’t simply use the research to manage their clients money.

If you like what you see here feel free to pass this on to others via email, use the Facebook icon below to share it there, or just suggest in personally to a friend.  If you are not currently a client, and would like to know more about this strategy – feel free to reach out to me directly via this contact form.  If you have general questions, just use the comment form a couple inches below this post.

Thanks for stopping by my blog and have a great day!

Regards,

Jason Wenk

In Investor Education Tactical Asset Allocation |

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