Strategic Allocation

Do target retirement date funds, offering glidepaths that shift asset allocations away from equities and toward bonds as target dates approach, safely generate attractive returns? To investigate, we consider seven such mutual funds offered by Vanguard, as follows:

• • Vanguard Target Retirement 2020 Fund (VTWNX)
  • Vanguard Target Retirement 2025 Fund (VTTVX)
  • Vanguard Target Retirement 2030 Fund (VTHRX)
  • Vanguard Target Retirement 2035 Fund (VTTHX)
  • Vanguard Target Retirement 2040 Fund (VFORX)
  • Vanguard Target Retirement 2045 Fund (VTIVX)
  • Vanguard Target Retirement 2050 Fund (VFIFX)

We consider as benchmarks SPDR S&P 500 ETF Trust (SPY), iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and both 80-20 and 60-40 monthly rebalanced SPY-LQD combinations. We look at monthly and annual return statistics, including compound annual growth rate (CAGR) and maximum drawdown (MaxDD). Using monthly total returns for SPY, LQD, three target retirement date funds since October 2003 and four target retirement date funds since June 2006 (limited by Vanguard inception dates), all through September 2025, we find that:

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How can investors and fund managers best exploit premiums associated with value, momentum, profitability, investment and low volatility factors, either to generate absolute return or to beat a market benchmark? In his September 2025 paper entitled “Strategic Style Allocation: Absolute or Relative?”, Pim van Vliet examines strategic allocation across long-only, value-weighted versions of these equity factors, depending on objective: absolute return or benchmark outperformance. To assess absolute return, he evaluates Sharpe ratios of factor allocations. To assess benchmark outperformance, he evaluates information ratios of factor allocations. He also investigates dynamic allocation between low volatility and the other factors, with portfolio adjustment frictions. Using long-only U.S. value-weighted factor returns during July 1963 through May 2025 and global factor index returns during January 1999 through March 2025, he finds that: Keep Reading

We have updated monthly allocations and performance data for the Simple Asset Class ETF Momentum Strategy (SACEMS) and the Simple Asset Class ETF Value Strategy (SACEVS). We have also updated performance data for the Combined Value-Momentum Strategy.

We have updated the Trading Calendar to incorporate data for September 2025.

The home page, Simple Asset Class ETF Momentum Strategy (SACEMS) and Simple Asset Class ETF Value Strategy (SACEVS) now show preliminary positions for October 2025. SACEMS rankings probably will not change by the close, but positions 1 and 2 are somewhat close. SACEVS allocations are unlikely to change by the close.

Are the “Simple Asset Class ETF Value Strategy” (SACEVS) and the “Simple Asset Class ETF Momentum Strategy” (SACEMS) mutually diversifying. To check, based on feedback from subscribers about combinations of interest, we look at three equal-weighted (50-50) combinations of the two strategies, rebalanced monthly:

1. 50-50 Best Value – EW Top 2: SACEVS Best Value paired with SACEMS Equally Weighted (EW) Top 2 (aggressive value and somewhat aggressive momentum).
2. 50-50 Best Value – EW Top 3: SACEVS Best Value paired with SACEMS EW Top 3 (aggressive value and diversified momentum).
3. 50-50 Weighted – EW Top 3: SACEVS Weighted paired with SACEMS EW Top 3 (diversified value and diversified momentum).

We consider as a benchmark a simple technical strategy (SPY:SMA10) that holds SPDR S&P 500 ETF Trust (SPY) when the S&P 500 Index is above its 10-month simple moving average and 3-month U.S. Treasury bills (Cash, or T-bills) when below. We also test sensitivity of results to deviating from equal SACEVS-SACEMS weights. Using monthly gross returns for SACEVS, SACEMS, SPY and T-bills during July 2006 through August 2025, we find that: Keep Reading

Do alternative “Cash” (deemed risk-free) instruments materially affect performance of the “Simple Asset Class ETF Momentum Strategy” (SACEMS)? Changing the proxy for Cash can affect how often the model selects Cash, as well as the return on Cash when selected. To investigate, we test separately each of the following yield and exchange-traded funds (ETF) as the risk-free asset:

• 3-month Treasury bills (Cash), a proxy for the money market as in base SACEMS
• SPDR Bloomberg Barclays 1-3 Month T-Bill (BIL)
• iShares 1-3 Year Treasury Bond (SHY)
• iShares 7-10 Year Treasury Bond (IEF)
• Vanguard Short-Term Inflation-Protected Securities Index Fund (VTIP)
• iShares TIPS Bond (TIP)

We focus on compound annual growth rate (CAGR) and maximum drawdown (MaxDD) as key performance metrics and consider Top 1, equally weighted (EW) EW Top 2 and EW Top 3 SACEMS portfolios. Using end-of-month total (dividend-adjusted) returns for the specified assets during February 2006 (except May 2007 for BIL and October 2012 for VTIP) through July 2025, we find that:

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Does adding an exchange-traded fund (ETF) or note (ETN) to the Simple Asset Class ETF Momentum Strategy (SACEMS) boost performance via consideration of more trending/diversifying options? To investigate, we add the following 24 ETF/ETN asset class proxies one at a time to the base set and measure effects on the Top 1, equally weighted (EW) Top 2 and EW Top 3 SACEMS portfolios:

Alerian MLP ETF (AMLP)
VanEck Vectors BDC Income (BIZD)
Vanguard Total Bond Market (BND)
SPDR Barclays International Treasury Bond (BWX)
Invesco DB Agriculture Fund (DBA)
iShares MSCI Emerging Markets (EEM)
First Trust US IPO Index (FPX)
iShares iBoxx High-Yield Corporate Bond (HYG)
iShares 7-10 Year Treasury Bond (IEF)
iShares Latin America 40 (ILF)
iShares National Muni Bond ETF (MUB)
Invesco Closed-End Fund Income Composite (PCEF)
Invesco Global Listed Private Equity (PSP)
IQ Hedge Multi-Strategy Tracker (QAI)
Invesco QQQ Trust (QQQ)
SPDR Dow Jones International Real Estate (RWX)
ProShares UltraShort S&P 500 (SDS)
iShares Short Treasury Bond (SHV)
ProShares Short 20+ Year Treasury (TBF)
iShares TIPS Bond (TIP)
United States Oil (USO)
Invesco DB US Dollar Index Bullish Fund (UUP)
ProShares VIX Short-Term Futures (VIXY)
ProShares VIX Mid-Term Futures (VIXM)

We focus on gross compound annual growth rate (CAGR) and gross maximum drawdown (MaxDD) as key performance statistics, ignoring monthly reformation costs. Using end-of-month, dividend-adjusted returns for all assets as available during February 2006 through July 2025, we find that: Keep Reading

Are all of the potentially trending/diversifying asset class proxies used in the Simple Asset Class ETF Momentum Strategy (SACEMS) necessary? Might one or more of them actually be harmful to performance? To investigate, we each month rank the nine SACEMS assets based on past return with one excluded (nine separate test series) and reform the Top 1, equally weighted (EW) Top 2 and EW Top 3 SACEMS portfolios. We focus on gross compound annual growth rate (CAGR) and gross maximum drawdown (MaxDD) as key performance statistics, ignoring monthly portfolio reformation costs. Using end-of-month, dividend-adjusted returns for SACEMS assets during February 2006 through July 2025, we find that: Keep Reading

What happens if we add bitcoin, as proxied by Grayscale Bitcoin Trust ETF (GBTC), to the asset universe for the Simple Asset Class ETF Momentum Strategy (SACEMS), which each month holds the top one (Top 1), the equal-weighted top two (EW Top 2) or the equal-weighted top three (EW Top 3) asset class proxy ETFs from a diversified set of nine based on total return over recent months? To check, we run the SACEMS model with (w/ GBTC) and without (Base) adding GBTC as a tenth available asset. Using end-of-month dividend-adjusted prices for baseline SACEMS asset class ETFs and GBTC as available during February 2006 through June 2025, we find that:

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In times of economic uncertainty, traditional safe haven assets (bonds and gold) have often failed. Is there a more robust safe haven approach? In his July 2025 paper entitled “Defense First: A Multi-Asset Tactical Model for Adaptive Downside Protection”, Thomas Carlson introduces the Defense First portfolio, which employs four macro-hedging assets:

• iShares 20+ Year Treasury Bond ETF (TLT – inception July 2002): for deflationary/disinflationary environments and Fed policy easing.
• SPDR Gold Shares (GLD – inception November 2004): for monetary instability and declining real rates.
• Invesco DB Commodity Index Tracking Fund (DBC – inception February 2006): for stagflation and commodity supply shocks.
• Invesco DB US Dollar Index Bullish Fund (UUP – inception March 2007): for times of global stress or funding crises.

He each month ranks these four assets based on equal-weighted momentum scores over the past 1, 3, 6 and 12 months. He substitutes SPDR S&P 500 ETF (SPY – inception January 1993) for any of the four that have weaker momentum than 90-day U.S. Treasury bills. He assigns weights of 40%, 30%, 20% and 10% to the resulting first, second, third and fourth selections. Prior to fund inception dates, he simulates returns using Vanguard mutual funds, asset class indexes or futures proxies. His benchmark is the Vanguard 500 Index Investor (VFINX). Using simulated and actual monthly returns for the specified funds during January 1986 through June 2025, he finds that: Keep Reading