Fintech executive, writer, math geek, and investment systems developer. Founder and CEO of Altruist and Founder of FormulaFolios.

Tactical Asset Allocation (TAA) Monthly Feature for May, 2012

Tactical Asset Allocation (TAA) Monthly Feature for May, 2012

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. [table id=6 /]

In the 8 months I've freely shared this model on my blog it has proven to provide a balanced way to achieve growth in a rising market (the market has only gone up during this time) even though the model has very sparingly used actual stock index funds in the process.

The model has steadily been backing off gold since the new year and for the first time completely removes it from the allocation.  Including backtesting this would be the first time the model would have no allocation to gold since December of 2008.  Why no gold?  Well, the model has a couple risk management features that close out a position in its entirety when momentum has shifted from positive to negative - and gold is now in that negative momentum trend.  I suspect gold will be back, perhaps sooner rather than later.  But for now there is simply more risk in owning it then potential reward so the model is looking elsewhere.

The big winner this year has been real estate and the model is shifting even more to that asset class for May.

The graph below (courtesy of Google Finance) shows the YTD returns for each of the four asset classes the model considers:

tactical asset allocation

tactical asset allocation

For clarity - VNQ is real estate, VTI is stocks, GLD is gold, and BND is bonds.

Since the model I share here is "balanced" it always keeps at least 50% of the portfolio in either bonds or cash.  Bonds have been a bit of a drag YTD, but have finally moved into positive territory.  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.

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

[table id=5 /]

To see how performance is measured just check out the static page on TAA here.

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.

Thanks for checking out this post and have a great day.


Jason Wenk

Market Update - May 14, 2012

Independent, Objective review of the Nationwide Destination B Annuity with Lifetime Income Rider