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

Tactical Asset Allocation (TAA) Update - May 2013

Tactical Asset Allocation (TAA) Update - May 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 stock market has been overbought for about a month now, and looked like it might start giving back some gains in April.  However, after just a couple percent correction, the bull market resumed.  Real Estate was also up very nicely in April (+6.73%), and continues to lead the way compared to other "growth" asset classes.

Gold, however, took a nosedive.  Over just two market days (a Friday and Monday), Gold dropped nearly 15%.  Despite rising after the big drop, it still finished down nearly 8% for the month.  Ouch!  Thankfully, if you were following the asset allocation updates on this blog, you already knew that gold was not so desirable.  We've only been 2% invested in metals.

For the month of April the stock market was up 1.61% (as measured by the Vanguard Total Stock Market index fund), bonds were up 1.02% (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 1.37%.  As for the Balanced Tactical Asset Allocation model, it fared very nicely, up 2.52%.

Despite starting the year a touch behind the benchmark, the Balanced Tactical model has surpassed our benchmark and is doing what it's supposed to: staying diversified, but making it's largest holding the most in-favor asset class (stocks/real estate, in this case).

Allocation Changes for This Month

There are a few modest changes for May in the Model.  Real Estate is now the largest overall "growth" holding, with a bit of stocks being moved to bonds, and gold continuing to be a very small allocation.

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

Market Update - May 14, 2013

Market Update - May 14, 2013

Is Now a Good Time to Buy Real Estate?

Is Now a Good Time to Buy Real Estate?