Yawning from the Market Sidelines, ETFs in Hand

That is likely your reaction to this market turmoil if you have been following my global tactical model.

It is risk management at its simplest, and depending on your start date, your portfolio would be 80-100% in cash/bonds right now (with 20% in commodities). There is a little (ok, A LOT of) guilty pleasure watching the market dump while being on the sidelines.

I have received emails from all over the world from people who run their own variants of the timing model, and it is gratifying to see that it is protecting investment capital so effectively this year (and out of sample since 2006). If you were following the model as exactly published in the paper, you would have been UP slightly on the year going into September (but I imagine slightly down with commodities coming off this month). You would be beating stocks by about 20% this year.

I have heard from everyone from little retail accounts to billion dollar hedge funds that have implemented the strategy.

I would love to hear if you are running the tactical model, your particular variant, and how you are doing YTD. Leave a comment to this post.

Here is a comment from reader Paulm recently:

"I'm following a 10-asset class, 130% GTAA model using leveraged funds based on Meb's white paper. I use a 4-week cycle instead of a monthly cycle. I'm currently 100% in bonds and cash. Took profits on DJP (DJP) on 8/11/08 and on GSP (GSP) on 9/08. Portfolio is +2.3% YTD and +4.1% YoY with a maximum drawdown of 4.7% measured on a weekly basis from peak to trough. Compared to a 60% IWB / 40% AGG benchmark, GTAA rocks!"

Let me hear from you!

A simple 5 asset class allocation with ETFs could be:

Domestic Stocks	20%	(VTI)
Foreign Stocks	20	(VEU)
Bonds	20	(BND)
Real Estate	20	(VNQ)
Commodities	20	(DBC)

A simple 10 asset class allocation with ETFs could be:

Domestic Large Cap	10%	VTI
Domestic Small Cap	10	(VB)
Foreign Developed Stocks	10	VEU
Foreign Emerging Stocks	10	(VWO)
Domestic Bonds	10	BND
TIPS	10	(TIP)
Real Estate	10	VNQ
Foreign Real Estate	10	(RWX)
Commodities	10	DBC
Commodities	10	(GSG)

Comments

[cma:]

What is the timing model? The link had only an abstract.

2008 Sep 18 11:52 AM

[sprintracer:]

cma cma:
There's a link above the title to download the entire article.

fg144331:
I'm also wondering the same thing. What is the best approach to switching from a B&H method to a timing method?

2008 Sep 18 12:12 PM

[myjunk1:]

how do you calculate the monthly price?

2008 Sep 18 01:59 PM

[JavaBen:]

Suggestion regarding your book - when I saw your site, I saw the picture of your book at the top left. I clicked on it thinking it would take me to a link about the book - wrong - so I decided it wasn't a book. Only much later did I see a link for your book. People expect to be able to click on a picture of a book and get to the book. Let it work for you!

2008 Sep 19 08:27 PM

[VistaFin:]

If you wanted a small cap/value slat in a lazy portfolio you could mix up the folowing

10% VB Small cap MSCI 1750
10% VBR Small cap MSCI 1750 Value
10% VV Large cap MSCI 750
10% VTV Large cap MSCI 750 Value
30% VEU FSTE all world ex-us
30% Intermediate Term Bond Portfolio

2008 Sep 26 05:23 PM