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

Tactical Asset Allocation (TAA) Update - November 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

Normally I get this update online about 1 week into each month. November has been a bit busy for me, however, so this is coming about 10 days later than normal.

Following a nice showing in September, October was equally solid for investors, especially equity investors. Bonds even went up a touch, so overall there was a lot of positive developments last month. November is thus far a bit more muted.  US stocks are up slightly for the month and all other asset classes are slightly negative (foreign stocks, bonds, commodities, and real estate). With just a few more business days left I'd guess that is also close to where markets will finish.

Back to last month's recap...

For October Stocks were up 4.6%, Real Estate was up 5.1%, Gold was up 1.1%, and Bonds finished up 0.60%. Our Balanced Tactical model finished up 2.58%.  The blended benchmark of 50% Vanguard Total Stock Market / 50% Vanguard Total Bond Market was up 2.39%.

Despite lagging our benchmark by a couple percent in 2013, the model is still nicely up and tracking for a solid year. In raging bull markets this rather defensive style of investing will rarely lead the pack, but markets don't go up forever, so I'm confident the model will more than pick up the slack whenever the next bear market decides to get under way.

Allocation Changes for This Month

From October to November the model barely changed. Stocks are still the leader of the pack, with a close to equal blend of US to non-US stocks (slightly favoring US stocks). The model is not a fan of Real Estate or Gold at the moment, so they are 0% weightings.

With only 1 week until our model rebalances, I can tell readers this is likely to hold true for December.The only change I could see potentially happening is a slight reduction in exposure to stocks. This is because the model calculates when an asset class has gone up substantially more in the short term than what it averages over the long term, and starts to reduce exposure to "lock in" gains. I'll report back in early December to let everyone know if that's the case.

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 - November 25, 2013

Market Update - November 25, 2013

Market Update - November 12, 2013