That’s it for the month March. Here are the tactical asset allocation updates for April 2015. All portfolios updates are online as part of Paul’s GTAA 13 Portfolio New sheet.
First, for the basic portfolios – the GTAA5 and the Permanent Portfolio. Only one change in the GTAA5 portfolio. Foreign stocks (VEU) went to cash this month, after only one month on buy signal. Definitely a little thrashing going on there. All other signals are the same from last month.
Now for the more aggressive GTAA AGG3 and AGG6 portfolios.
There were no changes for the AGG3 portfolios and only one change for the AGG6 portfolio. For AGG6, VTV fell out of the top 6 to be replaced by VCIT.
Performance for the portfolios so far this year is in the table below. Numbers are for each month and not compounded.
If you’re a fan of the Antonacci dual momentum GEM and GBM portfolios, GEM continues to be invested in US stocks (VTI), and the bond momentum option of the GBM portfolio continues to be invested in US long term gov’t bonds (VGLT). No changes from last month.
That’s it for this month. These portfolios signals are valid for the whole month of April. As always, post any questions you have in the comments.
50 Comments
Shawn Murphy · March 31, 2015 at 10:46 pm
Hi Paul! Why are the performance #’s on GTAA5 and IVY5 different? It looks like you have them with identical allocation. Do you mean GTAA 13?
paul.novell@gmail.com · April 1, 2015 at 9:47 am
No. IVY5 is the buy and hold version. GTAA5 is the timing version using the 10mo SMA.
Paul
Tony · April 1, 2015 at 7:23 am
In the GTAA 13 portfolio, why isn’t there something like RWX? Seems like diversifying the REIT allocation by splitting it between VNQ and RWX might be a good way to get additional diversity.
Also would have implications for the AGG portfolios when RWX is performing well.
paul.novell@gmail.com · April 1, 2015 at 9:51 am
Tony, to give you the dumb answer, because that’s the way the portfolio was designed. None of the major allocation methods include any allocation to international real estate. Could be because the asset class is relatively new. Doesn’t mean the portfolio could not be improved by it’s addition. The portfolio also does not include Japanese stocks, nor International small caps. Could the portfolio be better with all these additions? Maybe. Could these additions only make small differences and not be worth the added complexity? Maybe.
Paul
Tony · April 1, 2015 at 10:48 am
Thanks for the reply Paul.
I see what you are saying that there really is no end to diversification. Just seemed like since REITs get a 20% allocation in the GTAA 13 it would be a good idea to have at least two REIT ETFs. But then again, VNQ has really outperformed and RWX hasn’t done nearly as well.
Also, just wanted to say “thank you” for this blog. I have been a long-time reader and have gotten a ton of useful info. Please keep it up!
paul.novell@gmail.com · April 1, 2015 at 11:09 am
Tony, you do have a point about international real estate. It is just hard to say anything concrete about it since it is relatively new, at least as an investable asset class. I have a test GTAA portfolio running that includes international real estate, Japanese stocks, international bonds, international small cap, etc…and am monitoring it to see how it does. I’ll probably post on it in the future when I have enough data to say something useful.
Glad you enjoy the blog.
Paul
Pico · April 1, 2015 at 8:01 am
Paul, how does one go about putting a bet on oil prices? For example, if I think oil has bottomed out at $42 and it will rise back to $60 within 24 months, is there a index that can be purchased to make this bet?
Can one “buy and hold” oil so I can sell at any time in the future rather than a fixed date? Anything Vanguard related would be great.
Thanks
Andrew · April 1, 2015 at 8:55 am
If I may try to answer the question – I don’t think Paul makes bets on individual asset classes in that fashion. The closest approximation might be to include oil as part of a tactical asset allocation strategy (e.g. the commodities section of the GTAA13) or to use a GTAA3/GTAA6 portfolio that would buy commodities if they’re outperforming other asset classes in momentum.
paul.novell@gmail.com · April 1, 2015 at 10:02 am
Alex, as Andrew says it’s not what I do. Years ago, I did trade oil for a while and I always used futures. They are the cheapest most liquid way to make directional bets on big asset classes.
The commodity ETFs, GSG and DBC contain large exposure to oil, particularly GSG. There are also oil specific ETFs like USO and USL.
Paul
Randy · April 1, 2015 at 8:54 am
Hi Paul,
Based on your prior post I’m interested in the Permanent Portfolio, and understood it to be a fixed 25% allocation in stocks, bonds, cash and gold. Guess you re-balance annually?
Why is gold shown as a “cash” position above? If it requires monthly timing signals it’s not really “permanent” and would require a fair bit of effort/knowledge/attention. Do you also list/track the “fixed allocation” results for the Permanent Portfolio? Which method do you recommend?
Thank-you.
paul.novell@gmail.com · April 1, 2015 at 10:05 am
Hey Randy, yes, annual re-balance.
I track a timing version of the Permanent Portfolio for those interested. Faber has done some research that shows using the 10mo SMA on the Permanent Portfolio can improve returns. But it is the buy and hold portfolio that needs it the least for sure. If it were me I would just do the buy and hold version of the Permanent Portfolio. No need to track it it’s so simple. 25% each of the 4 asset classes, rebalance annually. Done.
Paul
Mark · April 1, 2015 at 10:51 am
Hi Paul,
I have heard you state in several of your posts that you have your investments spread over several strategies — tactical asset and quant (I believe that to be the case anyway). Where there is overlap in any of the tactical assets — where the strategy uses the same ETF fund or a closely related fund, I have a question. In those cases, do you invest in the same fund in both strategies where this occurs, or do you not do this so you aren’t potentially overweighted in a particular asset class. Hope my question makes sense.
Also, not interested in amounts, but would you be willing to share what strategies you are currently invested in today (vs. just tracking) and what % of your portfolio you have in each? Maybe you have shared this before and I missed it.
Thanks
Mark
paul.novell@gmail.com · April 1, 2015 at 11:19 am
Mark, I can give you some general parameters. I’m invested in AGG3, more aggressive versions of quant TV and XLP/XLU, a bond version of GTAA which I posted on briefly, and some buy and hold muni CEFs (my sole buy and hold holdout). About 25% each. In the cases where say AGG3 has a holding that my bond GTAA has, like right now with VGLT, then I let them overlap. Don’t think it’s a big deal since they both tactical allocations. I had an AGG6 holding for a while but thought it was way too redundant.
Paul
John · April 1, 2015 at 11:24 am
Thanks Paul – I really appreciate your work. Have you considered adding any sector-rotation strategies to the list of portfolios? For instance, both Meb Faber and Gary Antonacci (two of my favorite momentum authors) discuss sector rotation, and I am looking to implement this as a portion of my portfolio.
Have you looked into these strategies as potential additions?
Thanks for all you do!
paul.novell@gmail.com · April 1, 2015 at 11:37 am
John, I’ve thought about it but just never have gotten around to implementing them. The strategies are pretty easy to implement and quite powerful. But, for me, if I’m going to do an equity only strategy I prefer to be more aggressive and just hold the strategy in a smaller percentage. I’d rather be in a quant TV strategy vs an equity sector rotation strategy. I’ll put it only list of potentials for some point in the future.
Paul
Mark · April 1, 2015 at 11:27 am
Thanks Paul. Appreciate your thoughts as always.
John · April 2, 2015 at 4:25 am
Why are the averages in the spreadsheet different than the ones on this page?
When I click on the “Paul’s GTAA 13 Portfolio New” link it looks like VBK should replace VNQ in AGG3.
Andrew · April 2, 2015 at 6:54 am
I think because when he’s updating the website (above) he’s basing it on the closing signal of the last day of the month. So the post above was based on March 31st. In the spreadsheet though, it looks like it’s moved one day forward (the closing price on the first day of the month). So when a couple funds are right on the edge, they can bump around in ranking a little bit.
I actually had the same question, so I’d like to hear from Paul if that’s right! I’m following AGG 6, and it looks like the spreadsheet is now showing no turnover from the previous month.
John · April 2, 2015 at 7:32 am
Odd that the avg return for VNQ can vary from 6.57% to 12.53% based on one day’s difference in quotes.
Mark · April 2, 2015 at 9:18 am
Clearly something is off in the current spreadsheet. There hasn’t been that much movement to make that kind of swing. I’m sure Paul will address shortly.
paul.novell@gmail.com · April 2, 2015 at 9:23 am
Hey Guys, good eye. This brings up an important and maybe not very well understood point about this process of tracking these portfolios using month end updates. I’ve stated this before in comments but not quite loudly enough I feel. These monthly updates are only valid for one day, at the end of them month. They are invalid at any other time. So for example, on the nightly update on March 31, the one month performance of the portfolio was from the end of Feb to the end of March. The very next day, April 1st, the one month performance figure is from March 31 to April 1st, one day! It has no other data to use. So, yes the numbers can change quite dramatically. Similarly, for the other metrics. I’ll make this clearer in a future post.
Hope that helps.
Paul
Mark · April 2, 2015 at 9:48 am
Paul….not trying to be argumentative, but not sure I am seeing how your numbers changed so much. VNQ for example closed on 3/31 at 84.31. On 4/1 it closed at 84.19, a pretty insignificant change. The change in percents for VNQ from what you showed in your post on 3/31 to what is in your spreadsheet currently reflect a much larger change than that.
Are we all missing something?
paul.novell@gmail.com · April 2, 2015 at 10:22 am
Yes, Mark. You are missing that the starting month for the measurement of performance also changes.
For example, on March 31 the 3 mo performance for VNQ uses the closing price from the end of Dec, 80.52, as the starting price. on April 1 the 3 mo performance for VNQ uses the price from the end of Jan, 86.04, as it’s starting price.
Here are the differences for the 1 mo, 3 mo, and 6 mo performance numbers for VNQ just from the rollover of the month.
VNQ:
On March 31: 1mo, 3mo, 6 mo
1.74%, 4.71%, 19.66%
On April 1: 1mo, 3mo, 6,mo
-0.14%, -2.15%, 8.69%
I always double check my spreadsheet results with the portfolios as implemented in Portfolio123.
And I do make a lot of mistakes so I do appreciate the detailed feedback.
Paul
John · April 2, 2015 at 6:04 pm
So in deciding which stocks to include in a portfolio, should one use the chart from this post or the one from the spreadsheet?
paul.novell@gmail.com · April 2, 2015 at 6:09 pm
The post. I literally take a screenshot of the spreadsheet at month end. Normally the variations are not that big so usually there is not a big discrepancy.
Paul
Andrew · April 2, 2015 at 11:14 am
Since prices vary throughout the day, do you submit a market order for the opening, or buy at a certain time in the day, or just not worry about it?
Andrew · April 2, 2015 at 5:26 pm
Sorry if the question was stupid!
paul.novell@gmail.com · April 2, 2015 at 6:15 pm
No such thing.
Paul
paul.novell@gmail.com · April 2, 2015 at 6:13 pm
I don’t really worry about it. If I’m busy the next day I submit market orders for the following day. If I’m around I use limit orders but with the goal of getting orders executed early during market hours. Research has shown that trade results are better if you buy/sell at the open vs other times. Backtest results for the portfolios also show better results with opening prices. It’s not very conclusive but hey I’ll put the odds in my favor if I can.
Paul
Ilya Zakreuski · April 3, 2015 at 8:14 am
Hi Paul,
I would appreciate if you can clarify how you calculate monthly performance of the portfolios – I’ve noticed that the values in ‘Performance Tracker’ table are static.
I’ve tried to run the numbers using the same initial data set, but I’m getting slightly different results (up to 0.3% discrepancy for SPY). I’m wondering where is it coming from. Please check the ‘Performance Comparison’ sheet here.
Cheers,
Ilya
paul.novell@gmail.com · April 3, 2015 at 8:19 am
They are static. I just run them once a month. I use P123 AGG3,AGG6, Permanent, etc… numbers. I just search the web for the others like SPY, 60/40. There is not a lot of effort and thought I put into it. I don’t care about the exact monthly returns, an approximation is fine for me. When it comes the end of the year, then I care.
Paul
Ted · April 4, 2015 at 7:41 am
Hey Paul,
Great blog. I have been reading off and on for about a year. Thank you so much for sharing your work. It is interesting to read the posts from past years and see your investment ideas change and improve.
Ted
paul.novell@gmail.com · April 4, 2015 at 7:53 am
Hey Ted, thanks for the feedback. I have definitely changed my approach and investment philosophy since I started blogging.
Paul
Ted · April 4, 2015 at 11:00 am
I have been the same way since I bought my first stock at 13 years of age. Have dabbled in everything from day trading to commodities to strict Buy and Hold Drips. I actually was reading some old notes the other day from 1994 and it is amazing how my thought process has evolved.
Well anyway, blog is much appreciated and I have learned a lot. Currently transitioning my portfolio to an AGG3 method with a couple tweeks and all of your IVY posts have been a huge help.
Thanks again
Ted
Karti · April 4, 2015 at 9:58 am
Hi Paul,
I just came across your website and find it to be a great resource. There is a wealth of information and I am still figuring things out. Based on my other readings I am interested in following the GTAA5 method but am not sure how to put it in practice. Say I want to invest 50,000. Then I allocate 10,000 to each asset class and at present invest in VTI, IEF, and VNQ. Do I do this on the first day of the month or do I start slow and build up the position? Or do I wait until there is an entry signal? Also, is there some form of annual rebalancing or do I just let the portfolio run and get out of the assest class when an exit is triggered?
Thanks for your suggestions. I look forward to your insightful comments.
paul.novell@gmail.com · April 5, 2015 at 9:42 am
Karti, there is no one way. The historical data says just do it all at once and get started. But since we’re emotional humans I have found that most investors do better building up the portfolio over a few month, maybe in 3 chunks. Up to you. Over the long run it will not make much of a difference just make sure you’re around for the long run.
Paul
Karti · April 5, 2015 at 12:31 pm
Hi Paul,
Thanks so much for sharing your insights. Your are absolutely right about the emotional human part. I am concerned that I may be starting when the markets are at a high. So the same rule would apply if one has more money to invest and add to the assest classes? Also, does one have to do any annual rebalancing?
What is “long run” in your experience?
Thanks again!
paul.novell@gmail.com · April 6, 2015 at 8:12 am
Karti, yes, same rules. yes, annual rebalancing. Some people rebalance monthly but I think that is overkill.
Long run is at least one bull and one bear market, IMO.
Paul
Karti · April 6, 2015 at 7:33 pm
Hi Paul, thank you!
One (hopefully) last question. Should I wait until May 1 to get started or should I take the jump right away? Also, at this stage of the current bull market is it too late?
Thanks.
paul.novell@gmail.com · April 7, 2015 at 2:26 pm
Yes, the signals are all based on end of month prices and are only valid then.
There is no good answer to your second question. No one knows. Going back to 1973, the worst case draw down, peak to low, for the GTAA portfolio has been -10% no matter when you invested. You have to be ready for that kind of loss at any time, whenever you invest.
Paul
Andrew · April 6, 2015 at 8:01 am
Hi Paul – Does the Google sheet update anything automatically? I’m confused because it looks like you only update the Yahoo data once per month, but it seems like I’ve seen the listed ranks jump around between last Thursday and today.
paul.novell@gmail.com · April 6, 2015 at 8:10 am
The current month prices update once per trading day.
Paul
Andrew · April 6, 2015 at 11:46 am
Okay, I *finally* get it, LOL. Where the spreadsheet says “April 1” I thought that was the opening and closing price for April 1 only. I didn’t realize that was the opening and closing price for the entire month of April!
Everything makes a lot more sense now.
Mandar · April 10, 2015 at 1:52 am
Wow that helps! I love that the spreadsheet monthly number is updated daily – maybe versioning the google spreadsheet at the end of the month may help for those who wanted to compare.
Paul – how do you “auto update” the monthly price on the individual GTAA13 spreadsheet tabs on a daily basis? I had suggested the googlefinance() function but I couldn’t figure out how you’re doing the updates 🙂
Also, would it be possible to use a “30 day lookback” rather than a “current month only” method for the daily auto-updates? This will give us less volatility on the ranking movement for the month..
Thanks!
paul.novell@gmail.com · April 11, 2015 at 8:45 am
The formulas are in the spreadsheet.
Yes, you could do a daily update using daily prices. I don’t think it’s worth it but you could.
Paul
Orlando · April 14, 2015 at 6:06 pm
Hi Paul,
Around what time of the day (include your timezone please :)) do you update the spreadsheet at the end of the month? I think I looked the morning of April 1st and grabbed the first three (doing the AGG3). Does that matter? Or will the numbers (and rankings?) change only on the close of the first day?
Thanks for your clarification.
Orlando
Orlando · April 14, 2015 at 6:20 pm
Oh, nvm. Forgot about your screenshots above. The top 3 match the ones I bought so I’m good. I’m pretty sure your daily updates happen on market close so anytime before that on the first day of the month is good. In any case, you put up the screenshots anyway. Thanks for doing that, among many other things.
paul.novell@gmail.com · April 15, 2015 at 9:07 am
No problem Orlando.
Paul
Bob · April 18, 2015 at 6:15 pm
I just started the AGG3 portfolio in April (and really appreciate the thoughtful blog, Paul). My question is whether I should re-balance each month and invest 33 1/3 % of my total balance in each of the 3 signaled investments at the beginning of each month? I want to be sure I’m doing this right. Many thanks!
paul.novell@gmail.com · April 19, 2015 at 7:33 am
Hi Bob, I recommend re-balancing only once a year. The extra transaction costs and effort of a monthly rebalance are not worth it in my opinion. But you could rebalance once a month. When you do re-balance, then each position is brought back to its 33.33% size.
Paul
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