January 2nd, 2013 2:00 am 
Boomers' Beacon TAA Model positions for January are listed in the table below.
TAA Models - Jan 2013
| TD Ameritrade ETF | Fidelity ETF | ALLOCATION | BASIC TAA MODEL POSITION | ENHANCED TAA MODEL POSITION |
|---|---|---|---|---|
| VTI | IWV | 20% | Invested | Invested |
| VEU | ACWX | 20% | Invested | Invested |
| VNQ | IYR | 20% | Invested | Invested |
| DBC | DBC | 20% | Invested | Invested |
| IEF (or VGIT) | AGG | 20% | Invested | Invested |
Between these two TAA Models, I recommend my Enhanced TAA Model, if you choose to follow one of my models. However, I show the Basic TAA Model as a courtesy.
These TAA Models are probably best for personal funds held within an individual retirement account (IRA). They could also be used to manage your 401k account if your 401k plan has sufficient funds available to create the same or a similar model.
The Basic TAA Model mimics the classic tactical asset allocation (TAA) model developed by Mebane Faber. It uses the same timing signals as Mr. Faber’s original TAA model.
As I’ve mentioned in previous posts, Mr. Faber’s TAA Model was the inspiration for my research and led to the development of my TAA Models. My Enhanced TAA Model is a result of that research.
Enjoy the rest of this short week and happy new year!
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Hi,
I reviewed your postings nad reviewed the articles you wrote in search of what differentiates the enhanced models (both TSP and the regular models) from the basic models and was unable to find anything. Perhaps I did not go back far enough? Can you briefly highlight the differences?
Additionally, I use Vanguard for my non-TSP trading and I have been following Faber’s method for buying or selling ETF’s through their profile. As you probably know, the Vanguard ETF’s are all commission free. Consequently, I replaced DBF with VAW (a materials fund). The two ETF’s do not track identically but I wanted something that I could trade commission free. Have you considered adding another column to your spread sheet for Vanguard trades? The ETF’s that I am using are: BND; VAW; VEU; VNQ; VTI.
Thanks for your response.
Monty
Hi Monty,
I’ll take a look at your suggestion as I think it has merit. Concerning using Vanguard ETFs for a portfolio, I personally believe a person can build and manage an investment portfolio using only Vanguard ETFs and/or Vanguard mutual funds. Vanguard is a great company for individual investors and has contributed significantly to the lower mutual fund and ETF expense ratios over the years.
You are correct pointing out that all Vanguard ETFs can be traded commission free in a Vanguard brokerage account. I list ETFs for Fidelity and TD Ameritrade due to those brokerages’ consistent high ratings in various annual reviews. TD Ameritrade allows commission free trading a several Vanguard ETFs, but not all of them.
Concerning your use of Vanguard’s VAW ETF rather than DBC (I assume you meant DBC, not DBF), I like your idea. It is an excellent fund and you would think that it should do well whenever commodities are in demand. Additionally, holding the DBC ETF in a taxable account may require additional paperwork related to taxes and tax returns. Using VAW avoids those issues. For what it is worth though, VAW had a .87 correlation to the S&P 500 during the last year, which is quite high. DBC had a lower correlation of .55, so DBC may provide better portfolio diversification. Investors may want to consider these issues when deciding which assets to use in their portfolios.
Concerning the Enhanced TAA Models, the Enhanced TSP TAA Model uses multiple triggers to determine whether or not to be invested or in cash. You may have noticed the varying recommended percentages for each asset at times in the TSP TAA Model. The multiple triggers include different moving averages and best performing assets for varying lengths of time such as the last three months or six months.
The non-TSP Enhanced Model uses a different moving average than the 10 month SMA and nothing else. I am considering modifying it to use similar triggers that the Enhanced TSP Model uses.
Thanks for your comments and questions!
Thanks for you response.
On review I see I did fat finger a couple of words in there. You are right, I was referring to the DBC fund. I appreciate you taking a look at adding a Vanguard column to your spread sheet. Since most of the funds are already included in your current spread sheet it is not likely to be too much extra work. I went with VAW in my Vanguard account since it appeared to me to focus more on commodities; I did not run a correlation as you did.
In any event, I wish to say “thank you” for your work and your generosity in posting your research monthly. I was initially looking for a TSP solution and came across your postings. As you have done in your basic model, I also allocated a 25% share among the C;F;S; & I funds when they were trading above the 200 day moving average. I have been following this method for about a year and a half after reading Mebane Faber’s book. Took a bit of a hit last May by locking in some losses when the market did a swing back up the following month, but as you note in one of your postings there will be periods of under-performance when comparing to a buy and hold approach. It is the major losses we are trying to avoid.
I was intrigued by your enhanced TAA models, but did not find the allocation method. I have come across other allocation methods that assign weighted percentages relating to performance though and assumed that is what you were doing.
Thanks again, it looks like we’ll be dropping the F fund for the next month at least as we dropped below the 200 day moving average yesterday. Still one more trading day left this month though…
Cheers!
Monty