Most Tactical Asset Allocation (TAA) strategies trade just once per month. Strategy developers almost always assume trades are executed on the last trading day of the month. A unique feature of our platform is the ability to follow these strategies on any other day of the month as well. We’re not simply executing the same signal on other dates; we’re recalculating the strategy’s entire position, while maintaining the integrity of the original strategy (read more). Strategy outperformance when trading at month-end: Historically, TAA strategies have outperformed when traded on the last day of th ..read more

This is a deep dive into which share disposal method – FIFO or LIFO – would have been more tax advantageous for the 80+ asset allocation strategies we track. When selling shares FIFO (first in, first out), the oldest shares held are sold first. When selling LIFO (last in, first out), the most recently purchased shares are sold first. We find that the investor’s share disposal method would have had a major impact on tax efficiency, especially when combining multiple strategies together into a Model Portfolio, but that the best approach has been a mix of FIFO and LIFO. Of course, this analysis i ..read more

We’ve added a new objective to the Portfolio Optimizer. Members can now find the combination of TAA strategies that would have maximized the Ulcer Performance Index (UPI), aka the “Martin Ratio”. Members: begin exploring the Max UPI portfolios now. UPI is a measure of return relative to drawdowns (i.e. losses). It captures both the length and severity of all drawdowns, not just the single worst drawdown. Learn more. As we’ve discussed before, if we had to pick just one measure of risk-adjusted return, we would choose UPI over more common alternatives like the Sharpe and Sortino Ratio. Here is ..read more

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