TAA Investing


Here are the tactical asset allocation updates for May 2015. All portfolio updates are online as part of  Paul’s GTAA 13 Portfolio New  sheet.

First, for the basic portfolios – the GTAA5 and the Permanent Portfolio. Only one change in the GTAA5 portfolio. Foreign stocks (VEU) went back to invested this month, after only one month on cash signal. Yet more thrashing going on there. All other signals are the same from last month.

TAA May 2015 Update for GTAA5 and Permanent

Now for the more aggressive GTAA AGG3 and AGG6 portfolios.

GTAA AGG3 AGG6 May 2015 update

Some significant changes in the AGG3 and AGG6 portfolios for this month. For AGG3, 2 of the 3 holding changed this month. VGLT and VNQ were dropped and replaced by VWO and VTV, VWO having a big month. AGG6 had the same change in the top 3 but also had VCIT dropped to be replaced by VEA. Foreign stocks had a good month. Also, of note is the fact that both portfolios are 100% stocks at this point.

Performance for the portfolios so far this year is in the table below. Numbers are for each month and not compounded. The figures are estimates taken from a variety of sources.

TAA Portfolios May 2015 YTD performance

If you’re a fan of the  Antonacci dual momentum  GEM and GBM portfolios, GEM continues to be invested in US stocks (VTI), and the bond momentum option of the GBM portfolio continues to be invested in US long term gov’t bonds (VGLT). No changes from last month.

That’s it for this month. These portfolios signals are valid for the whole month of May. As always, post any questions you have in the comments.


Tagged , , , , , , ,

28 thoughts on “ Tactical asset allocation – may 2015 update

  1. Thanks for sharing – appreciate your work

    Do you think with so many variations of the asset allocation models, it is beneficial to apply more than one? I tend to jump around which defeats the purpose

    With AA models so simple now, do you still continue selling puts using SMA50/SM200 for up trend identification?

    Thank You

    1. Justin, yes, I do think it’s beneficial to apply more than one. Mostly for behavioral reasons. All models under perform for periods of time. Having more than one increases the chances you’re outperforming somewhere. That does a lot of good for the psyche. Also, there is some diversification benefits.

      Don’t understand your puts question. I don’t sell puts and when I did I never sold them for ‘up trend identification’.


      1. Hey Paul

        Thanks for the response. Sorry I was unclear about my question, I was mostly referring to your post here:

        Where you mention you sell cash secured puts using the following criteria despite ease of implementing the various quant models

        “I like to use the 50 and 200 day SMA to identify uptrends. Ideally, I’d like to see the stock above both SMAs. An even more strict criterion is to have both SMAs rising but I will accept less especially when a stock in reversing a trend. ”

        Thank You

        1. Justin, I don’t trade options any more. Those were the days of discretionary trading which I don’t do anymore.


          1. Thanks Paul

            I’ve been looking to generate additional income via options selling puts systematically. Is this still worth pursuing given your experience with dabbling into this in the past? Or that discretionary trading was not profitable


          2. For me it was not worth continuing with discretionary trading. My decision had nothing to do with profitability. I had done well enough. It had to do with ROI, or return on my time. I wrote a post about it. See here .


  2. I recently discovered your blog and I’m enjoying catching up on your posts. Looking through your spreadsheet I noticed you’re calculating the SMA based on monthly dividend-adjusted closing prices. Do you think a 200 day SMA would make any significant difference in the signalling vs the 10 month SMA?

    I haven’t been able to convince myself either way whether dividend-adjusted or non-adjusted pricing makes better sense for the SMA. Do you have any insight why dividend-adjusted pricing makes more sense?

    1. Many studies have shown that dividend adjusted prices lead to better results. That’s really all that matters. As to the why, it’s because the goal of these systems is to catch trends, trends in returns, and dividend adjusted prices capture total return, not just price return.


  3. re: AGG3/AGG6 “Also, of note is the fact that both portfolios are 100% stocks at this point.”

    Hi Paul… Maybe I’m misunderstanding how these work. Is it just the “cash” positions that go into the top 3/top 6 or does all of your money go in the top 3/top 6… I was under the impression that it was the former, but by what this says, it makes me think the whole portfolio is in there

    1. The whole portfolio. AGG3 has 3 holdings only, 33.33% each. AGG6 has 6 holdings, 16.67% each. So, for example, if you had a $100K portfolio and you just invested in AGG3 yesterday you’re holdings right now would be $33.33K inn VWO, $33.33K in MTUM, and $33.33K in VTV.


      1. thanks Paul…
        I see what you mean, but there is a strategy where you take the “cash” position in the GTAA 13 and put just that amount equally into the top 3 performers, correct?

          1. Just out of curiosity… what do you think of that idea… taking the money in the GTAA 13 that is supposed to be in cash and instead dividing that amount equally and investing it in the top 3 performing ETF’s

          2. Tony, sorry, I missed this comment. I really have no opinion. I would need to backtest the portfolio over a long period of time in order to say anything about it.


  4. Hey Paul,
    The screencasts are nice… Thanks! Looking forward to watching more.
    Was wondering if you had any time to ponder my last comment

  5. Paul,
    I am new to your blog, which is excellent. I have 2 questions: for the AGG3 and AGG6 portfolios, to determine either the 3 or 6 efts to distribute the entire investment, does the pool of etfs you evaluate come from only the 13 etfs comprising the GTAA 13?

    Also looking at your back testing of the AGG3 and AGG6 the negative returns in any one year is maximum 4-5% yet the max DD can be over 20%. How is that derived?

    thanks Paul. I appreciate your fine work

    1. First answer, yes, the AGG portfolios choose from among the GTAA 13 ETFs.

      Max DD is calculated on a monthly basis. Worst year is worst year. The shorter the period the higher the drawdown. Always.


  6. Thanks Paul. I would like to know your thoughts on including perhaps sector etfs as well as currency etfs in a more expansive etf pool for selection criteria in the AGG3 or AGG6. I just read Mebane’s paper: Relative Strength Strategies For Investing, where he does suggest that. Wondering if any back testing has been done.

    1. Steve, the AGG portfolios already use relative strength. I don’t think the addition of sector ETFs or currency ETFs would add much but I haven’t looked at the data.


  7. Paul,
    I notice that your averages are different in your spreadsheet for several of the etf’s than what you are showing on this web page. For example, on this page you are showing VTV at 5.11% and in the top 3; however, on your spreadsheet VTV is 4.57% which would remove it from the AGG3. Am I misunderstanding this?

    1. Steve, the numbers in the spreadsheet change every trading day. My posts only capture the snapshot of one day, the last trading day of the month – the only day where the signals are valid.


  8. Thanks Paul. You recommended multiple portfolios for diversification as well as to compensate for under-performance in any one portfolio. But since the GTAA AGG3 and AGG6 portfolios, and even the GTAA13 to a large extent, I would think that would defeat the purpose. Or do you feel differently about this?

  9. I meant to say if you diversify across those 3 portfolios, you would own 3 of the same etfs in all 3 portfolios, and 6 of the thirteen etfs in two of the portfolios. Perhaps not the best diversification strategy.

    1. Steve, yes, you would not want to own correlated portfolios. For example, using AGG3 and AGG6 would not be the best choice because they are highly correlated. But using AGG3 with a quant portfolio like Trending Value, or a buy and hold portfolio like the Permanent Portfolio, or GBM would be a good approach.


      1. Agreed. I like the GTAA approach due to low drawdowns and not having to own individual stocks. Are you aware of any TAA portfolios that are not highly correlated with the AGG3 or AGG6.
        Thanks Paul for your analysis and sharing all this information.

Comments are closed.