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Being in the Right Asset Class at the Right Time

Of course, you would have been up 32.1% had you been 100% in the bond market that year. But only a 3.2% loss would have sure been more palatable than a 38.5% drubbing being 100% in stocks.

A 50/50 stock bond portfolio since Jan. 1, 2008, is up a grand total of 6.37%. A 100% stock portfolio is up 22.9%. A 100% bond portfolio is up 36.4%. Being 100% invested in the best performing asset class each year since Jan. 1, 2008, however, would be up an astonishing 259%!

Modern Portfolio Theory? Indeed. I am not buying it. Nor am I saying that is possible to always be in the best performing asset class each and every year. But if we can tilt our portfolios towards the best performing asset class each year, we are going to greatly improve our performance over time.

With a new year just around the corner, here is where I currently stand on the stock vs. bond debate: I have been 100% in stocks throughout 2013. Here is why.

Every day, I rank 45 different classes from a short-term, intermediate-term, long-term performance basis. I also include a good dose of technical analysis.

When I go back and look at my rankings at the beginning of the year, U.S. small-cap stocks of all flavors (growth, value and dividend) were at the top of the leaderboard. They have been at the top all year long.

In fact, the top 10 asset classes have been U.S. stocks of shapes and sizes all year long! No emerging markets. Emerging markets are down double digits so far this. No commodities. Commodities have had a terrible year. No precious metals. Precious metals are down over 25% year to date. No fixed income. The U.S. long bond, as represented by the iShares Barclays 20+ Yr Treasury Bond (TLT) ETF, is also down by double digits this year.

Lastly, no inverse exchange-traded funds! Being short the market in 2013 has been the worst place to be. Yet, I watch one pundit after another on a daily basis telling me to get out of the market. The bears have been wrong for almost five years now!

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