Tactical Asset Allocation (TAA) // February 2015
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
2014 is in the books and 2015 has started quite a bit differently than most investors enjoyed the previous year. US stocks dropped nearly 3% after posting the only double digit gains of all asset classes last year. It could be a changing of the guard, so to speak, as all other asset classes posted solid gains in January.
Leading the pack early in 2015 are gold and real estate, up 8% and 6%, in just January. Bonds also posted a solid month, up nearly 2.5%. International equities were up too, though just 0.27%.
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 2.75% while a simplistic blend of just stocks and bonds is down 0.33%.
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.
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:
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I've also added some long term metrics on return and risk here (complete with data going back to 1997):
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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.
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