TAA Model for February, 2012


This is a monthly feature at the MarketSci Blog.

Our Tactical Asset Allocation (TAA) model selects up to four assets from a diversified 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.

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 outperformed its benchmark in January, returning (as of yesterday’s close) +3.7% vs 2.6%.

I’m pleased with the strong returns in January given how defensively the portfolio was positioned. For February, the model will reduce allocation to Treasuries and add a 21% position in U.S. large cap stocks (SPY).

The model has underperformed its benchmark in the 16 months since inception.

As I’ve always tried to make clear, the model would historically have gone through long periods of underperforming its benchmark (especially when the benchmark has been strong). 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).

The real-time results since inception are definitely in line with backtests, and I’m as confident in the model’s soundness today as I was making our very first trade.

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Happy Trading,

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One Response to “TAA Model for February, 2012”

  1. 1 Wednesday links: hedging on hedge funds | Abnormal Returns

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