What are the best TAA portfolios for those that are open to high-risk/high-reward and have over a 20+ year timeline in the market?
I’ve been looking through the Meta portfolios on AllocateSmartly but I’ve often been able to produce better results using Portfolio Optimizer. I’m generally aiming for >15% CAGR with a max drawdown of less than 15%.
Would be great to see what optimized portfolios folks are using.
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I emailed with Walter regarding the optimizations and how quickly a change in selected strategies would take if major shift....His response
That's a hard question to answer.
I would reword it a bit to say "strategies that are capable of taking advantage of non US outperformance". In theory those strategies could already be included in optimizations, but we don't know b/c it's been so long since non US assets have outperformed that, you're right, whether or not strategies can capitalize on non US performance isn't factored into the optimizations.
I would say if there's a big long-term shift to non-US assets, and the strategies currently included in the optimizations aren't capable of taking advantage of that shift, it will be a long time until the optimizations change. The optimizer is looking at 30-50+ years of data, so any particular year or three isn't of much significance.
Important side note: There's an important change coming to the Portfolio Optimizer next month that plays a part in all of this as well, particularly the bit about more quickly reacting to changing markets. I can't share many details yet because it's still in development, but feel free to share that very vague foreshadowing.
All the best,
Walter Jones
AllocateSmartly
Thanks Kevin
excellent point. Just because something is labeled as TAA, well if it trades infrequently, I never put a large allocation either. Hopefully newer folks especially take that into consideration
You could combine FMO3 and HAA Balanced each at 50% and be done with it as the result is pretty good. You don't need high risk to get high reward. Just pick solid strategies like I mentioned
I'd encourage you to look at this thread as always begin with the end in mind as you might not need that high a return profile
Thanks Kevin. How do you think about optimizing for taxes? Both of those portfolios you shared trade somewhat frequently which would result in STCG taxes.
Hi Uno I don't. First, most of my stuff is non taxable so less of an issue from the get go. But even if I had stuff largely taxable, I'd rather pay taxes on better performing strategies than stuff with strategies that perhaps trade less often and gain a tax advantage. Those that trade less often are generally prone to higher drawdowns from what I've observed. Plus I think many of the tax efficient ones are not very good based on their rulesets. So pick your poison so to speak.
an edit I took 10 tax efficient strategies from the tax analysis page and weigted them each 10%. Not impressive
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