A Rules-Based Approach to Managing a Portfolio


A prelude to this week’s commentary: BlackRock made financial news headlines by announcing a change in how some of its active mutual funds will be managed. Rather than rely on human stock picking, the company is shifting to a heavy reliance on quantitative strategies. Commentary about the change was quick to use the word “robots” to describe the funds’ new managers.

BlackRock’s decision comes as the active versus passive debate continues. Just five days after BlackRock’s announcement, The Wall Street Journal ran an article headlined, “Active Managers Stage a Comeback.” The article, citing data from Morningstar, said that 45% of all active U.S.-based managers (including stock and bond fund managers) beat their respective index alternatives.

Those of you looking at this back-and-forth between the so-called quants and traditional active strategies should realize that you don’t need to have a proverbial dog in this fight. You can choose quantitative strategies or you can choose to use a blend of quant and active. You do this by following a rules-based approach to portfolio management. The checklist displayed to the right is a simplistic, though effective, example of how quantitative and active approaches can be combined into a followable strategy. Continue Reading »

Let the AAII Journal Guide You to Better Investment Returns

AAII is a nonprofit association that provides you with member benefits, tools and services all designed to help increase your investment wealth. With membership, you’ll receive the monthly AAII Journal—our most popular benefit. Topics covered include financial planning, retirement issues, taxation, fund and stock selection, stock screening and a host of timely investment ideas and concepts that you’re certain to benefit from.

Forbes Magazine says, “The AAII Journal is a thoughtful mix of investment professionals’ views” and that “the $29 a year it costs to belong to AAII is a bargain.”

Free Guide—New Members are rushed a comprehensive guide that covers our popular library of Stock Screens in great detail.

Join AAII and See the New April Issue!

More on AAII.com

Highlights from this month’s AAII Journal

AAII Sentiment Survey

Optimism is very close to the bottom of its typical range and pessimism is very close to the top of its typical range. More about this week’s results.

This week’s results:
Bullish: 28.3%, down 1.9 points
Neutral: 32.1%, down 0.3 points
Bearish: 39.6%, up 2.2 points
Historical averages:
Bullish: 38.5%
Neutral: 31.0%
Bearish: 30.5%

AAII Asset Allocation Survey

Equity allocations rose to their highest level in nearly two years, while cash allocations fell to a two-year low. More about the latest results.

March AAII Asset Allocation Survey results:

  • Stocks and stock funds: 67.6%, up 2.1 percentage points
  • Bonds and bond funds: 17.0%, down 0.3 percentage points
  • Cash: 15.5%, down 1.7 percentage points

March AAII Asset Allocation Details:

  • Stocks: 28.2%, up 1.2 percentage points
  • Stock Funds: 39.4%, up 0.8 percentage points
  • Bonds: 4.9%, up 1.6 percentage points
  • Bond Funds: 12.1%, down 1.9 percentage points

View the Asset Allocation Survey.

What’s Trending on AAII

  1. 16 Financial Ratios for Analyzing a Company’s Strengths and Weaknesses
  2. Factors Allow Investors to Think Differently About Diversification
  3. How Much Small Cap Should Be in Your Portfolio?

The Week Ahead

Dow Jones industrial average component JPMorgan Chase (JPM) will report its first-quarter earnings on Thursday. Joining it next week will be fellow S&P 500 members Fastenal (FAST) on Wednesday and Citigroup (C), Delta Air Lines (DAL), PNC Financial Services Group (PNC) and Wells Fargo (WFC) on Thursday.

The week’s first economic reports will be the Labor Department’s February job openings and labor turnover survey (JOLTS), which will be released on Tuesday. Wednesday will feature March import and export prices. The March Producer Price Index (PPI) and the University of Michigan’s preliminary April consumer sentiment survey will be released on Thursday. Friday will feature the March Consumer Price Index (CPI), March retail sales and February business inventories.

The Treasury Department will auction $24 billion of three-year notes on Monday, $20 billion of 10-year notes on Tuesday and $12 billion of 30-year bonds on Wednesday.

Local Chapter Meetings

AAII Local Chapter Meetings offer you a variety of presentations from expert speakers who will give you their view on the world of investing. A bonus of attending a Chapter Meeting near you is the opportunity to meet other AAII members who share your interest and enthusiasm for investing. You can even share the Chapter experience with your family and friends by inviting them to attend Chapter Meetings with you! Upcoming Meetings »


Leave a Reply

Your email address will not be published. Required fields are marked *