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

Tactical Asset Allocation (TAA) Monthly Feature - March 2013

Tactical Asset Allocation (TAA) Monthly Feature - March 2013

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 /]

Previous Month Recap

The unsustainably strong start in January subdued quite a bit in February.  Stocks, Bonds, and Real Estate all rose; but mildly.  Gold tanked.  Once the dust settled investors should have modest increases in their portfolios (whether they are aggressive, conservative, or somewhere in between).

Now that Sequestrian is over, and was pretty much a dud, there should be some normalcy in the markets for a couple months.  This doesn't, however, mean they'll all just go up - it just means there is no major news from Washington that might disrupt the usual patterns.  Stocks though, are still a bit overbought and the same goes for Real Estate.  Which leads me to believe that if there are gains in March, they'll be modest at best.

So long as there aren't any major corrections, the first quarter of 2013 will shape up to be solid for investors.

For the month of February the stock market was up 1.27% (as measured by the Vanguard Total Stock Market index fund), bonds were up 0.37% (as measured by the Vanguard Total Bond Market index fund), and a 50/50 blend of the two (our benchark for this model) was up 0.82%.  As for the Balanced Tactical Asset Allocation model, it finished up 0.72%.

Despite starting off a touch behind the benchmark, the Balanced Tactical model is doing what it's supposed to: staying diversified, but making it's largest holding the most in-favor asset class (stocks, in this case).  The slight lag for February was due to our modest allocation in Gold.  Gold dropped 5.43% in February (ouch!).

Allocation Changes for This Month

There aren't a whole lot of changes for March in the Model.  Bonds are still close to the lowest allocation the model allows (always at least 50% to stay balanced).  Gold has been reduced again down to just 4%.  Stocks and Real Estate still lead the way amongst the "growth" asset classes, with a slight bit more stocks than real estate.

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.  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:

[table id=5 /]

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

[table id=9 /]

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!


Jason Wenk

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