TAA Model for January, 2013

28Dec12

This is a monthly feature at the MarketSci Blog.

Our Tactical Asset Allocation (TAA) model selects up to four assets from a diverse basket of asset classes on the final trading day of each month. Below is the new allocation for today’s close. Click to read more about the TAA model.

Note: I’ll be out and about on NY eve, so the model is trading a day early this month.

20121228.01

I eat my own cooking, so I’ve devoted a healthy share of my own net worth to the TAA model (read why). On the last day of each month I share my new allocation (see above) and real-time performance (see below).

The model performed inline with the benchmark (50% SPY/50% IEF) in December, both returning (as of yesterday, 12/27) -0.2%.

20121228.02

For January, the model will be selling the S&P 500 (SPY) and replacing it with Japan stocks (EWJ).

Since inception, the model has stacked up well against similar active strategies like Cambria’s ETF GTAA and the Permanent Portfolio (PRPFX), but has lagged what I think is the most important benchmark, a passive investment in equities and Treasuries rebalanced monthly (see stats below).

A relevant post from The Reformed Broker (h/t Abnormal Returns):
http://www.thereformedbroker.com/2012/11/30/a-graveyard-for-tacticians/

As I’ve discussed before, the model would historically have gone through extended periods of underperforming its benchmark, especially when the benchmark has been strong (as it has been over the last couple of years). This is a “generational” model and I’m much more concerned with returns over the next decades than any one month or year (read more).

. . . . .

20121228.03

20121228.04

Happy Trading,
ms

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4 Responses to “TAA Model for January, 2013”

  1. 1 Mike

    Will you take new positions today? Is the stockmarket closed on 31/12?

    • 2 MarketSci

      Hello Mike – see note near top of post – I’ll be out and about on NY eve, so I’m taking positions a day early. michael

  2. Michael, Based on the dips in May/June and November have you considered shortening your time period between rebalancing? Only recently I started following your TAA Blog, just after starting an ETF TAA effort of my own. Given the recent market dips, I plan to rotate/rebalance weekly and rank the ETFs based on a one month returns. I have added a bit of subjectivity to my ETF selection in an attempt to minimize correlation. Out of the top 10 ETFs in my ranking, I choose 5 that seem somewhat different to invest in. Really enjoyed reading your blog. Thanks, Rich

  3. 4 Mark

    Hello Michael,
    No TAA position changes for February?
    Regards,

    -Mark-


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