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 a diversified combination of TAA strategies, we could delay the execution of trades by a full day (i.e. trade today’s signal tomorrow) with little impact on long-term results. Read more. That’s the first way investors can make things easier on themselves ..read more

This is quick explainer on linear vs logarithmic charts. We hope that even experienced users who are familiar with the subject will find a nugget or two of useful wisdom in here. We provide all backtests in two flavors: linear and logarithmic (log). There’s a button below each chart where you can switch between them (see blue arrow in image below): Linearly-scaled charts: Below is a linear chart showing a hypothetical portfolio returning 10% a year for 40 years. This type of chart, showing investment performance, is called an “equity curve”. Each evenly spaced horizontal line represents the ..read more

We’ve radically redesigned the charts we use to show backtested performance throughout the member’s platform. At first glance, the new charts look familiar, but there are a ton of useful ways members can now manipulate them. Let’s look at four new features: Zoom by predefined periods, with rebasing to $10,000 Zoom by specific start and end dates, with rebasing Zoom by mouse, with rebasing Rolling performance comparisons 1. Zoom by predefined periods, with rebasing to $10,000 Member selects a predefined period of 1, 3, 10 or 20 years. We show performance over that period of time. Importantl ..read more

This is a test of the 12-Month High Switch Model, a Tactical Asset Allocation (TAA) strategy from Meb Faber. Meb has done more than anyone to popularize TAA as a trading style, including many of the fundamental concepts used today. This is another of his simple but effective ideas. Backtested results from 1970 follow. Results are net of transaction costs – see backtest assumptions. Learn about what we do and follow 80+ asset allocation strategies like this one in near real-time. Logarithmically-scaled. Click for linearly-scaled results. When the market is making new highs, it often scares i ..read more

Members can now compare both investment strategies and their own custom Model Portfolios to alternative benchmarks like the S&P 500 or Nasdaq 100. Previously, we only benchmarked to the 60/40 (60% US stocks, 40% US bonds), the de facto standard in US asset management. To try it now, go to Compare Strategies and select up to 5 strategies/portfolios/benchmarks. * * * Since launching this platform 7+ years ago, we’ve always resisted adding stock index benchmarks like the S&P 500. We’ve tried to tick everything off members’ wish lists, but we intentionally avoided this one on principle. We ..read more

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 European investor might take in trading US TAA strategies with UCITS funds. Below is a summary of those four approaches. Each differs based on the assets used to generate the trading “signal” (i.e. the strategy’s asset allocation at any given moment ..read more

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 the Sharpe Ratio or minimizing volatility. Note that for the foreseeable future this feature will be for Pro members only. It exposes our engine to stress, and while we learn more about how users will use it in the real-world, we’re limiti ..read more

This is a test of the “simple” variation of Dr. Keller and Keuning’s strategy from their paper Dual and Canary Momentum with Rising Yields/Inflation: Hybrid Asset Allocation (HAA). We’ve covered the “balanced” version of HAA previously. It has become one of the more popular strategies on our platform, and members have asked us to add this simpler-to-execute variation as well. Backtested results from 1971 follow. Results are net of transaction costs – see backtest assumptions. Learn about what we do and follow 80+ asset allocation strategies like this one in near real-time. Logarithmically-sca ..read more

This is a test of Paul Choi’s paper Balance Between Growth and Dividend: Dividend & Growth Allocation (DGA). This strategy would have delivered exceptional performance over the last 50 years, but we would temper future expectations for several reasons we discuss below. Backtested results from 1974 follow. Results are net of transaction costs – see backtest assumptions. Learn about what we do and follow 80+ asset allocation strategies like this one in near real-time. Logarithmically-scaled. Click for linearly-scaled chart. DGA would have consistently delivered big returns relative to loss ..read more

Background (we’ve covered all of this before, but just to bring readers up to date): We track 70+ Tactical Asset Allocation strategies sourced from research papers, books, etc. A subset of those strategies have a significant flaw: when shifting to a defensive risk posture, they blindly dump the portfolio into bonds (mostly US Treasuries) regardless of how bonds are currently performing. This flaw was exposed in 2022 when risk assets and bonds fell simultaneously to a degree not seen in nearly 100 years (read more). As one would expect, strategies with this flaw performed poorly because they ..read more