August 2018 Review

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I am changing the way I present the review of the three strategies.

Each section will be titled with a question and under that question will be the data, tables, or commentary that answers the question. At the end I will give the answer I take away from the data presented.

I hope this makes it easier for readers to see and understand the data presented. I would love to hear your comments or let me know if there are other questions you would like me to try to answer.

QUESTION: How did the portfolios perform?

Cumulative returns of each of the strategies as though you had invested $100,000 in them at the beginning of the blog.


ANSWER:  All returns are positive so that is good. The TA strategy is doing everything I would hope it would do. The enhanced strategy continues to struggle and I am revisiting the way that I "enhance" that portfolio going forward. 


QUESTION: What happened in the market that impacted returns?

Equal Portfolio: This portfolio is invested equally in each of four asset classes. In August it returned 2.0%. It is the baseline or benchmark against which I judge the other portfolios.

TA portfolio: This portfolio is currently 100% in large cap US equity.  The US has shown strong growth and, probably due to the size of our economy, the markets seem to believe that it is the safest place to be as the world grows more protectionist.

Enhanced portfolio:  This portfolio has struggled as it has a lot of international exposure. Money is flowing into the US and out of other countries (see TA explanation). There is also a small allocation to commodities, as a defensive measure, which have not performed well since they were added.




QUESTION: How do the returns compare to other similar strategies?

 A review of all tactical asset allocation mutual funds using Morningstar data shows the following.

August 31, 2018 return percentile. The % tells where the fund ranks during that period (100% would be the top performing fund, 0% would be the bottom)

         1 Mo        3 Mo       1 Yr    3 Yrs    5 Yrs
Equal          66%         82%       79%     -na-     -na-
TA          84%         99%       99%     -na-     -na-
Enhanced          32%         77%       42%     -na-      -na-

A few key statistics about the peer groups for each period.
Peer Group 
# of Funds  300    296   280   233   176
Max 7.05%  7.67% 26.97% 13.91% 11.74%
Min-2.79% -3.71% -7.44%  -8.75%  -8.88%

ANSWER: Equal is performing strongly, probably benefiting from no international exposure. It is beating almost 80% of the active tactical allocation managers over the past year. TA is doing outstanding with only a handful of managers doing better. The Enhanced strategy is not doing well and has now fallen below 50% for the year.  



QUESTION: What were the returns of the underlying holdings this month?
Equal Portfolio: 

 AGG        0.6%   
JNK         0.7%  
VONE      3.4%
VTWO     4.3%

TA portfolio: 

VONE      3.4%

Enhanced portfolio:  

VONE       3.4%
JXI           -0.7%
KXI          -0.8%
DSEEX     4.1%
DBCMX  -1.3%
IEMG      -2.7%

Color significance:
Red          =   Small cap equity 
Orange    =   Large cap equity
Purple     =   High yield debt
Green      =   Investment grade debt
    ANSWER: The Enhanced strategy was the only one with holdings that had negative returns.  All of those holdings were international or commodities. 

    QUESTION: How did this months trades affect the underlying holdings?

    Allocations during August were:



    Allocations after the trades (September 4th) are:



    ANSWER: Trades only affected the Enhanced Portfolio where I sold a little JXI and bought VONE. VTWO's increase in the Equal portfolio was due to price changes.
    QUESTION: What is the track record of realized investments?

    August 31st one year performance (in order): VTWO (25.5%), VONE (19.7%), JNK (2.0%), AGG(-1.3%).

    TA: Position taken one year ago: VONE
    Rank: 2nd

    History1st2nd3rd4th
    Number of Bets: 04 0 0 
    % of Bets: 0% 100% 0% 0%



    Enhanced: Position taken one year ago: VONE
    Rank: - neutral
    History +=-
    Number of Bets: 013
    % of Bets: 0% 25% 75%

    ANSWER: Pretty good for the TA strategy and horrible for the Enhanced strategy - this shows in the returns.

    DISCLAIMER:
    Past performance is not a guarantee of future performance.  This strategy is presented for informational purposes only and is not a solicitation to buy or sell any securities. October is one of the peculiarly dangerous months to speculate in stocks in.  The others are July, January, September, April, November, May , March, June, December, August and February. ~ Mark Twain

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