One Approach To Rational Retirement Plan Investment Allocations

Of course, FFFDX came back eventually. By the end of January 2011, more than 2½ years later, it was back at the level it had achieved on April 1, 2008. By the end of September 2016, FFFDX had an adjusted return of about 42% measuring from April 1, 2008, a period of 8 ½ years, for a return of about 4.2% per year on average, if you had the stomach and patience to wait it out.

What else can be done?

So I’ve been interested finding a better way to manage my retirement account which is how I found and began to follow the Logical Invest (“LI”) strategies.

Let’s take a look at an analysis of the advice offered through my LI subscription. An LI Portfolio Builder run shows the performance for 17 different LI pre-configured portfolios assembled to meet a wide range of investment objectives. Consider one low volatility portfolio, the Max CAGR with Volatility<7% portfolio (MC/V7%). It offers a considerable contrast to the performance exhibited by FFFDX. This portfolio, comprising LI strategy-advised ETFs, suffered less than a 6% intra-month drawdown over the time period from April 2008 to March 9, 2009. While a 6% drawdown is not welcome of course, it beats 40%, and is not sufficient (probably) to lead me to panic, blink and sell; while 40%+ most likely would.

The MC/V7% portfolio exhibited another excellent attribute – it returned over 230% between the spring of 2008 and the end of September 2016, for a compound annual growth rate of over 19%. The advice from LI over this period was based simply on establishing a portfolio objective and then applying “adaptive asset allocation” by rebalancing monthly in accordance with momentum-related signals delivered from the LI models.

In both cases, FFFDX and the LI Max CAGR Vol<7%, the results showed staying the course during the financial crisis was a better choice than bailing out on March 9, 2009.

Well, how is that plan working out recently? Fidelity FFFDX is up about 6% YTD (October 1, 2016) while the LI Max CAGR Vol< 7% is ahead by about 16% for the year as of September 30, according to the LI online Portfolio Builder. But short term, MaxCAGR Vol<7% started out Q4 down nearly 2%, while Yahoo Finance shows FFFDX is off less than ½% this first week of October.

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