TAA Investing


Here are the tactical asset allocation updates for July 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. There was one change in the GTAA5 portfolio. Bonds (IEF) went to cash this month. GTAA5 is now 40% invested and 60% cash. For the timing version of the Permanent Portfolio there were no changes this month. The TAA version of the Permanent Portfolio is 50% invested and 50% in cash just like last month.

GTAA5 and PP July 2015 update

Now for the more aggressive GTAA AGG3 and AGG6 portfolios.

GTAA AGG3 and AGG6 July 2015 update

There is one change for AGG3 this month. VTV has replaced VBR in the top 3 although not by much. For AGG6, there is no change this month. While VGIT replaced VGLT in the top 6, VGIT is below its 200 day SMA and thus there in no investment in the ETF. AGG6 like last month only has 5 holdings for July.

Performance for the portfolios so far this year is in the table below. Numbers are for each month. The figures are estimates taken from a variety of sources. I don’t do detailed performance tracking until the end of the year.

TAA Porfolio Performance July 2015 update

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 July. As always, post any questions you have in the comments.

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22 thoughts on “ Tactical asset allocation – july 2015 update

  1. Hi Paul

    Thanks again for all your work. Two quick clarifications

    1) The YTD Performance tracker on permanent portfolio, is that the timed version or the buy & hold version?
    2) Could not find any information on “GAA”. Is that the Cambria Global Asset Allocation ETF from Faber?


    1. Yes, GMP is short-hand for Global Market Portfolio. The goal of GAA is to index the world market.

  2. Thanks for publishing this each month.

    Quick question. I was reading your post about absolute momentum. If one were to apply this instead of the 10 month moving average for the AGG6 they would move the VEA fund to cash and be invested in VGIT instead, correct (so still 5 funds)?

    I may be misunderstanding how it would be applied so I wanted to check. I think it’s just a matter of looking at the 12 mo return column to see if the fund is above the 90 day treasury which something like 0.1% I believe.

    Again, just checking that I am understanding how this would work in practice.


    1. Hi Jeff, yes, that’s how it would work. I’ve switched to absolute momentum for my personal versions of the GTAA AG portfolios. I’m using 6 month absolute returns. I compare it to the 6 month Tbill, them make the appropriate decisions.


      1. Thanks for the reply.

        So in this case you would be in 5 funds for the AGG6, right? The VTV would be in cash and the other 5 of the top 6 would be invested.

        And would you mind explaining the rationale for 6 mo vs. 12 mo?

        1. Correct. In my post on the massive market timing study, you’ll see that absolute momentum was the best timing strategy and that the optimum mean period was 7 months. 6 months is close enough and available in all the tools. This is very different from the commonly used 12 month period, as in Antonacci’s system. But the use of 12 months was determined over a much smaller historical sample period. So, I think the shorter period is more robust but either system I think will do just fine. This is my conclusion after looking at the data.



          1. Paul,

            How about for the relative momentum part (when you use 6 month absolute momentum based on the study you discussed vs a 10 mo SMA)? For your relative momentum are you using 6 months or the average of 1/3/6/12 months momentum?

            Thanks for all your efforts!

  3. Great Work Paul! Question on the timing version of the Permanent portfolio:
    Is that using the 10 month SMA and moving to cash for any asset class similar to the IVY5? Also have you backtested results for the timing version of Permanent portfolio?
    Thanks Again

  4. I’m sorry if you answered these questions before as well, but:

    1) Do you rebalance to exact %’s every month, or if there is a small variance from the ideal position (say less than .5%) do you ignore adding/selling in that position?

    2) Do you keep your cash position in short term bonds, or just money market?

    1. Hey Andrew,

      1. Nope. I rebalance once a year. I think the slippage costs far outweigh any benefit from a more frequent rebalance.
      2. Lately, I just keep it in the money market. The slippage in trading in and out of SHY or an equivalent ETF doesn’t seem worth it at todays low rates. When rates get above 1% then I think it will be worth getting in and out of SHY.


  5. Hey Paul,
    Do you know anything about Faber’s Cambria GAA ETF… Is it basically running the GTAA13 system with some variation on holdings?

    1. GAA implements the global market portfolio as Faber discusses in his book. It’s buy and hold.


  6. Paul,

    I have a question about using a combination of quant & TAA approaches. I’ve seen in some of your responses that you don’t like going with a single strategy and prefer using a combination. This makes a lot of sense.

    Having said that, you have stated (and I agree) that a big part of the value of these rules-based approaches is that is makes it more likely that investors will stick with the approach.

    But it raises the question that if there isn’t some sort of a systematic, rules-based approach to using a combination of approaches it can put the investor back into the 2nd guessing mode. “Am I using the right combination of approaches? Am I now too weighted toward equities? Should I change my allocation between strategies” etc etc.

    In other words, might having so many options around the potential strategies to combine bring back a lot of the complexity that these models help to reduce?

    Any practical advice on how to combine strategies in a systematic way that is maybe based on investment goals, life stage, etc.?

    I’d be curious to hear your thoughts on this and thanks as always.

    1. Jeff, it is not something I worry about too much because there is no right answer, and the optimum approach changes all the time based on correlations, valuations, what parameter you’re trying to maximize… IMO spending too much time on over optimizing leads to poor investment behavior. My fundamental decision is between equity/equity like investments and bond/bond-like investments. For me that split is 50/50 (25% equity quant, 25% AGG3, 25% bond quant, 25% buy and hold bond) based on where I am in my retirement, my tolerance for drawdowns, etc…This fundamental decision or split will only change slowly over time, say after an extended bear market.


      1. Thanks so much for the response. Makes a lot of sense. The only part that is still causing some confusion for me is that the TAA approach includes both equities and bonds as potential investments. It then steers the investor into the appropriate investments (or cash) based on the rules of the approach. So at times I may be in all equities, at other times all bonds, etc.

        So by forcing a 50-50 split doesn’t this undo the advantage of the approach of getting in and out of asset classes over time?

        1. Yes, in theory, if the strategies perform in the future like the backtests show. According to the historical backtests I should be 100% in TAA approaches. It’s the best of all worlds. But reality is messy. Nobody has run a real money TAA portfolio for the length of the historical period. So, I take the data with a huge grain of salt.

          Also, like every investor my personal situation, preferences, and biases, need to be accounted for in portfolio construction.


  7. Paul – have you considered combining trend/momentum with sectors? I’d be curious to see how that backtests.

    For instance, biotech stocks are doing well in 2015 and it would be good to have a strategy that rotates between sectors based on SMA200. Thanks

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