This is a deep dive into which share disposal method – FIFO or LIFO – would have been more tax advantageous for the 80+ asset allocation strategies we track. When selling shares FIFO (first in, first out), the oldest shares held are sold first. When selling LIFO (last in, first out), the most recently purchased […]
TAA Analysis
Maximum Ulcer Performance Index (UPI) Portfolios
We’ve added a new objective to the Portfolio Optimizer. Members can now find the combination of TAA strategies that would have maximized the Ulcer Performance Index (UPI), aka the “Martin Ratio”. Members: begin exploring the Max UPI portfolios now. UPI is a measure of return relative to drawdowns (i.e. losses). It captures both the length […]
Make Things Easy on Yourself: “Roll Up” Small Asset Positions
Here are some things we know about Tactical Asset Allocation: (Learn more: What is TAA?) We shouldn’t go 100% “all in” on just one TAA strategy. That introduces “specification risk”, or the risk that we’ve bet on an underperforming horse. Instead, we should combine multiple strategies together into what we call Model Portfolios. When trading […]
European Investors and TAA Strategies: Four Approaches
We track 80+ Tactical Asset Allocation (TAA) strategies, most of which were designed from the perspective of a US investor trading US ETFs. Most European investors can’t access US ETFs, instead trading UCITS funds listed on non-US exchanges, often denominated in currencies other than USD. In this post we’ll provide data analyzing four approaches a […]
Portfolio Optimizer Version 3.0: Custom Optimized Model Portfolios
We just released version 3.0 of our Portfolio Optimizer for Pro members and it’s awesome. New here? We track Tactical Asset Allocation strategies. Members can combine those strategies together into what we call “Model Portfolios”. The Portfolio Optimizer shows the optimal mix of strategies to trade in your Model Portfolios based on objectives like maximizing […]
Inflation and Stock/Treasury Correlation
There has been a surge in correlation between US stocks and Treasuries over the last couple of years. To illustrate, below we’ve shown the rolling 3-year correlation between US stocks and 10-year Treasuries since 1900 (based on monthly returns). Note the spike at the far right of the chart. What is correlation? In this context, […]
Long-term Returns for US Treasury Funds Are Predictable
Long-term returns for US Treasury bond funds with a constant maturity (like IEF, TLT and SHY) have been quite predictable simply using initial Treasury yields as an estimate. This observation was popularized by John Bogle. Here’s an excellent recent look from Portfolio Optimizer. How predictable? Below we’ve shown the intial yield on 10-Year US Treasury […]
Super-Secret Proprietary Black Box Strategies
Note: This is a rare non-geeky, non-quantitative, stream of thought blog post. Because we’re so deep into this world of Tactical Asset Allocation (TAA), we’re sometimes asked for our thoughts on such-and-such black box TAA strategy. By “black box” we mean a strategy for which the trading rules are not disclosed to investors (nor to […]
Tactical Asset Allocation Performance During the 2022 Bear Market
As a whole, Tactical Asset Allocation (TAA) did not manage losses during the 2022 bear market as well as it has during previous downturns. Individual strategies varied and some did well, but a primary function of TAA is loss management, and any failure to do so is worth analyzing further. In this post, we’re going […]
A Key New Momentum Measure to Consider: Distance from 1-Year High
This research was inspired by Alpha Architect’s coverage of a new paper looking at how the distance from a stock’s 1-year high has affected the performance of momentum strategies and the likelihood of “momentum crashes”. We look at the same question applied to a stock index: the S&P 500. We show that how far the […]