Be Tactical!

Feeling financially funky and can't quite put your finger on why? Well, I mean because other than the big ugly mess our country is in and the paranoia we all seem to be experiencing about job stability.

Maybe it's this: Yesterday was the one year anniversary of the 2009 March stock market bottom famously noted as 666. Yikes. That's intraday. Your portfolio should be up but most investors are certainly not made whole.

And today is the ten year anniversary of the infamous Tech Bubble Burst. Remember sock puppets and Internet grocery shopping?

Have we as investors learned anything? After the tech bust Modern Portfolio Theory came back to the forefront as financial advisers went back to helping clients invest "by the book." After the recent meltdown--during which if your portfolio was beautifully allocated a la MPT it didn't help very much, if any--advisors and clients are moving toward "go anywhere, buy anything, turn on a dime, get defensive when called for" global tactical asset allocation mutual funds. This type of fund bested the classic indices by a good 10-15% during this meltdown. Down, yes, but less loss by a good measure.
(Above: 10 year growth of a well-respected global allocation/asset allocation fund)

It's sort of a MPT approach but with no set parameters. Sometimes it's right to have half a portfolio's assets in a combination of cash, gold and Forex plays (Yen/Dollar trades, for instance). That's what one of these funds held in the midst of the recent meltdown. They were down 25% in '08 rather than ~38%.

These funds may not be for you and I am not recommending them. Just stating the facts. But there is something about macro allocation and global diversification and a wide mandate by prospectus that appeals to me and has for years. I want the folks running my money to be able to go to cash in a big way or greatly pare down bonds or cut way back on US equities (blasphemous!) as they see fit. Because I like it when the annualized return number is higher than the standard deviation risk number over periods of time (especially like now) and many of these funds do just that.

The investment mantra to remember: Be Tactical!


  1. That first graph is genius. Kind of makes me want to print it out and run into wall street offices yelling "SEE?!".

    All joking aside, the problem here is media attention. It's only once the media latches onto it, dubs it messianic, gets everyone to buy into it, and has people proselytizing it, that we have problems.

    Investing for the average person today seems to have less to do with independent research, and more with what they saw on MSNBC. My problem with this is that speculation has taken place of actual physical changes in the market. MPT fails because it doesn't take into account behavioral finance, which includes modern speculation and feelings associated with investing.

    It's almost like the chicken and the egg, except it's speculation and performance.

  2. David,
    Thanks for the comment. You are spot on. Greed's pull is much stronger than logic's and fear's push.

    GREAT post on your blog 3/4/10 (and others too, of course). Fiat currency, indeed. Let's go back to the gold standard. People, highly recommended--go check out the post at...


    David, I think you will appreciate my next post, too.

    Best Regards,