tactical asset allocation

This program is (for the moment) shared freely on the last trading day of each month at the MarketSci blog (click for previous signals).

Each month our Tactical Asset Allocation (TAA) model selects up to four assets from a diversified basket of asset classes. We execute trades using ETFs at the close on the final trading day of each month.

We've written extensively about TAA on our blog. We suggest starting here to better understand TAA and why it's so important, and here to look under the hood at how this particular model works.

TAA MODEL VS BENCHMARK (10/2010 - 12/2012)

Results are based on following the asset allocation presented each month on our blog. The benchmark is an investment of 50% S&P 500 (SPY) and 50% 10-year US Treasuries (IEF), rebalanced monthly.

There hasn't been a significant difference between the model and benchmark so far. The real strength of TAA should become apparent when equities and related asset classes go through a protracted downturn. Until then, we're happy to keep pace with the benchmark given how diversified our holdings are.

We ignore transaction costs and slippage here. At the end of this page we provide links to actual account statements from a small account following this strategy, and discuss the expected drag from transaction costs and slippage.

SUMMARY STATISTICS VS BENCHMARK

ACTUAL ACCOUNT STATEMENTS & TRANSACTION COSTS

We track the official performance of this strategy with an actual $50,000 account traded at Trade King. We chose to start the account with $50,000 because this is the smallest account we felt an investor could trade without transaction costs significantly impacting results.

To date, slippage has been non-existent (as a result of both how liquid the ETFs traded are and the fact that the model uses MOC orders). Transaction fees have resulted in only about a -0.2% total drag annually on returns.

Armed with this information it should be simple to estimate the drag from transaction fees at other brokers trading other account sizes.

Links to actual account statements:

12/2012, 11/2012, 10/2012, 09/2012, 08/2012, 07/2012, 06/2012, 05/2012, 04/2012, 03/2012, 02/2012, 01/2012, 12/2011, 11/2011, 10/2011, 09/2011, 08/2011, 07/2011, 06/2011, 05/2011, 04/2011, 03/2011, 02/2011, 01/2011, 12/2010, 11/2010

summary stats