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A new year has started, but the performance view for the major asset classes doesnt look

all that different


from the final days of the old year, at least not yet. Lets consider how the numbers stack up with a set of ETF
proxies using a 250-trading-day window. By that standard, US equities are still in the lead, although the
performance edge has weakened a bit. Meanwhile, theres still plenty of red ink at the opposite end of the
return spectrum.
Stocks in these United States are up more than 27% through yesterday, January 13, based on the Vanguard
Total Stock Market ETF (VTI). At the far end of the losing side of the ledger: a broad measure of
commodities, as tracked by the iPath DJ-UBS Commodity ETN (DJP).
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Asset Allocation And Rebalancing Review
Jan. 14, 2014 10:36 AM ET | by: James Picerno 2 comments | Includes: BND, DJP, VTI
Asset Allocation And Rebalancing Review [Vanguard Total Stock Market... http://seekingalpha.com/article/1944501-asset-allocation-and-rebalancing...
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For another perspective, lets graph the return histories for each of the major asset classes for the past 250
trading days. The next chart shows the performance records through January 13, 2014, with all the ETFs
rebased to 100 as of January 15, 2013:
(click to enlarge)
Now lets review an ETF-based version of a passive, market-value-weighted mix of all the major asset classes
-- the Global Market Index Fund, or GMI.F, which is comprised of the ETFs in the table above. Here's how
GMI.F stacks up for the past 250 trading days through January 13, 2014. This investable strategy is higher by
11% over that span, or roughly midway between the returns for US stocks (VTI) and US bonds (BND) for the
same period.
Asset Allocation And Rebalancing Review [Vanguard Total Stock Market... http://seekingalpha.com/article/1944501-asset-allocation-and-rebalancing...
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(click to enlarge)
Comparing the overall dispersion of returns for the major asset classes via ETFs suggests that the rebalancing
opportunity is relatively middling for GMI.F vs. recent history. Analyzing the components of GMI.F with the
rolling median absolute deviation of one-year returns for all the funds -- the GMI.F Rebalancing Opportunity
Index, as it's labeled on these pages -- suggests that theres average potential for adding value by reweighting
the portfolio in comparison with the past several weeks.
(click to enlarge)
Finally, lets compare the rolling 1-year returns (defined here as 250-trading-day performance) for the ETFs
Asset Allocation And Rebalancing Review [Vanguard Total Stock Market... http://seekingalpha.com/article/1944501-asset-allocation-and-rebalancing...
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in GMI.F via boxplots. (Keep in mind that the historical records for these ETFs vary due to different launch
dates). The gray boxes in the chart below reflect the middle range of historical returns for each ETF the
25th to 75th return percentiles. The red dots indicate the current 1-year return (as of Jan. 13) vs. the 1-year
return from 30 trading days earlier (blue dots, which may be hiding behind the red dots in some cases). Note
that US stocks (VTI) remain in the lead in absolute and relative terms vs. the other asset classes.
(click to enlarge)
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TAS Comments (1567)

I had to chuckle at your 250 day return chart of major asset classes.
Yikes....
Good article. Re-balancing a portfolio is a good idea on an annual or semi-annual basis.
14 Jan, 03:30 PMReplyLike1
tallguyz Comments (614)

I don't think I understand the "re-balancing" concept as it applies to investing.
I think it says "Sell your winners instead of letting them run, and double down on your loser/under
performers" or something like that.
If that's true, I'll never have any home runs, just singles and maybe a double from time to time, and will
bat about .250. Is that right??
15 Jan, 10:48 AMReplyLike0
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