A subscriber asked about the performance of a strategy that each month rebalances to 25% international equities, 25% U.S. equities, 25% U.S. Treasuries and 25% BBB bonds, and how this performance compares to that of a portfolio that each month allocates 50% to Simple Asset Class ETF Value Strategy (SACEVS) Best Value and 50% to Simple Asset Class ETF Momentum Strategy (SACEMS) equal-weighted (EW) Top 2. To investigate, we use:
- iShares MSCI EAFE Index (EFA) to represent international equities.
- SPDR S&P 500 (SPY) to represent U.S. equities.
- iShares Barclays 20+ Year Treasury Bond (TLT) to represent U.S. Treasuries
- PIA BBB Bond Fund (PBBBX) to represent BBB bonds, since there is no exchange-traded fund (ETF) that tracks BBB bonds with a reasonably long history.
We begin the test at the end of June 2006, limited by SACEMS inputs. We ignore monthly rebalancing frictions for both strategies. Using monthly dividend-adjusted prices for EFA, SPY, TLT and PBBBX starting June 2006 and monthly gross returns for 50-50 SACEVS Best Value and SACEMS EW Top 2 starting July 2006, all through June 2021, we find that:
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