Asset Allocation 01 (Jun 09 - Jul 13)

[winston]

Age-Based Asset Allocation: Following the Best “Flight Path” to Retirement by Jason Jenkins

At the beginning of the investor cycle, you would be a lot less aggressive.

However the flight approach is more aggressive in later investing years.

http://www.investmentu.com/2012/Novembe ... ation.html

[winston]

Year End Window Dressing coming up, so it's time to check my current allocations:-

From November 12, 2012:-
Equities: Decreased to 25% from 28% ( Dividend Stocks decreased to 11% from 13% )
AUD Cash: 25%
Gold & Gold Stocks: 9%
MYR Cash: 11%
Puts & Inverse ETFs: 0%

So maybe I should increase the allocation to Equities from the current 25% to 35% by year end.

Thereafter, I should very quickly decrease it back to 25% during the first week of January 2013.

[winston]

Year End Window Dressing coming up ...

I should increase the allocation to Equities from the current 25% to 35% by year end.

Still have not been able to get the allocation up to 35%...

Current Allocation only at 29% but has increased from 25% ( on Dec 9th )

[winston]

As of Jan 01. 2013

Equities: 30% ( Dividend Stocks 10% )
AUD Cash: 24%
Gold & Gold Stocks: 9%
MYR Cash: 10%
Puts & Inverse ETFs: 0%

May have to reduce exposure to Equities to about 20% by Jan 15th, from the current 30%

[winston]

Balance your portfolio

The Dow Jones Industrial Average rose 166 points on the last trading day of 2012, finishing at 13,104.14, a gain of 7.3 percent.

A resolution to the fiscal cliff is getting close. Tax will be increased on those earning US$450,000 (HK$3.51 million) per year while the middle class is not going to bear any burden. Tax hikes and spending cuts will be postponed for two months.

Shanghai A shares gained 3 percent last year, the worst among the world's stock markets.

Further upside is possible if major economies resort to quantitative easing. Unfortunately, emerging markets cannot stop the liquidity inflow.

For this year, many analysts recommend a switch from low- yielding bonds to riskier assets such as stocks and commodities. But Dr Check remains neutral on this point.

Even the mainland poured four trillion yuan (HK$4.9 trillion) into the economy while the United States implemented the first and second rounds of quantitative easing.

Now the United States has resorted to QE3 and QE4 while Japan has come up with some kind of a QE policy.

If the global economy's fundamentals do not change much, the Hang Seng Index may just target the 24,000 to 25,000 level, or an upside of only 6 to 10 percent.

Dr Check recommends a balanced portfolio of yuan, stocks, bonds and gold.


Source: Dr Check, The Standard HK

[winston]

The Oxford Club recommends:-
30% in U.S. stocks,
30% in International stocks,
10% in high-yield bonds,
10% in short-term corporate bonds,
10% in TIPS (inflation-adjusted Treasuries),
5% in REITs and
5% in gold shares.

This should lead to higher returns with less risk.

[winston]

Let age determine stock holdings

Yesterday I said it is reasonable to switch some of your bonds, deposits or dividend-paying REITs to riskier assets such as high-beta and China-related Hong Kong stocks as the US Fed is unlikely to change the current liquidity-driven scenario.

If you want to switch, the simple formula is to allocate your assets according to age.

If you are 40 years old, a simple way is to allocate 40 percent in non-stock and 60 percent in stock.

But the global economy still has major uncertainties. The European debt crisis may break out again and Greece still has a chance to leave the euro zone. China's shadow banking is a big potential risk and is said to involve 30 trillion yuan (HK$37.3 trillion). There could be big losses if defaults occur. Such potential time bombs should breed caution.

The Hang Seng Index will do well to rise to only around 25,000 this year.

So, let's switch some non- stock to stocks, but limit the percentage stock holdings to 100 minus your age.


Source: Dr Check, The Standard HK

[winston]

Fund Flows and the Positive Feedback Loop by Joshua M Brown

And so as allocation plans are drawn up, on a go-forward basis, the new math looks like this:
BarCap Global Aggregate Bond Index 3-year performance: 4.97%
S&P 500 Total Return 3-year performance: 15.3%

The question is, do you really think professional managers are going to underweight stocks anymore, now that the 3-year numbers look like this?

This is how the positive feedback loop begins. We can talk about how it ends another time.

The psychological shift away from the 2008 mindset happens slowly at first - and then all at once.

The driver here is allocation. The shifts happening right now within the $60 trillion pool of investable assets are tectonic.

http://www.thereformedbroker.com/2013/0 ... back-loop/

[winston]

Money from Bonds moving into Equities

This past week bond flows started to lose money and stock mutual funds, domestic and international, saw big inflows.

$4B into domestic, $3.6B into international. A very good, big week.

The bond grip on funds may be cracking and investors are looking, likely belatedly, at stocks. Stocks are at new post-bear market highs in terms of SP500 and the small

and midcap indices and NOW retail is coming around?

Often is the case that when the retail investor gets committed, the top is in.

It will, however, take awhile for the retail investor to shift from bonds to stocks and the influx of new money will help maintain an upside market bid as it occurs.


Source: Investment House

[winston]

Sold a lot of Equities yesterday so it's time to check my Asset Allocation:-

As of Jan 15, 2013
Equities: 20% from 35% ( Dividend Stocks 11% )
AUD Cash: 24%
MYR Cash: 10%

Gold & Gold Stocks: 13% from 9% ( Gold Stocks: 6% )

Puts & Inverse ETFs: 0% ( no set-up yet )