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market-timing fund ?
Old 02-10-2007, 02:02 PM   #1
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market-timing fund ?


What's the deal with Vanguard's Asset Allocation Fund (VAAPX) ?

"The fund allocates its assets among common stocks, bonds, and money market instruments in proportions consistent with the advisor’s evaluation of their expected returns and risks. These proportions are changed from time to time as return expectations shift. The fund may invest up to 100% of its assets in any one of the three asset classes."

Sounds like a polite way of saying "market timing" !

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Re: market-timing fund ?
Old 02-10-2007, 04:42 PM   #2
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Re: market-timing fund ?

Well, "rebalancing" is a polite way of writing "market timing", is it not?
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Re: market-timing fund ?
Old 02-10-2007, 07:34 PM   #3
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Re: market-timing fund ?

'taint rebalancing! VAAPX is definitely market timing ... it explicity "allocates its assets among common stocks, bonds, and money market instruments in proportions consistent with the advisorís evaluation of their expected returns and risks. These proportions are changed from time to time as return expectations shift." for those who think the Wellington management team might have a clue, this is not a bad thing. (it's occasionally useful to check its allocation, admitedly delayed, to see what the pros are thinking.) for those who think that such timing is a definite no-no, there are vanguard's index funds. pick your poison.
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Re: market-timing fund ?
Old 02-10-2007, 08:03 PM   #4
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Re: market-timing fund ?

Looks like they went from 100% stocks to 90/10 stocks/bonds at the beginning of May. Good call. They are back at 100% stocks now, but I can't tell when they made the switch. They've underperformed the S&P500 for the last few months, so they were probably a little late getting back in.

Anybody have their long-term timing history? Looks like they've performed about the same as the S&P500 with the same beta over the long term.
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Re: market-timing fund ?
Old 02-10-2007, 08:52 PM   #5
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Re: market-timing fund ?

Per Yahoo under risk at ten yrs: 0.35 alpha, 1.04 beta and 78 R squared against the standard index which tells me

I held VG Lifestrategy moderate for ten plus yrs - a quasi 60/40ish fund containing 25% slice of the Asset Allocation fund.

Handgrenadewise I didn't see that much to get excited about - at least not enough to switch to the plain vanilla VG Balanced Index.

Their switching formula is rumored to be quant based - but I can't get excited. The 1 and 5 yr alpha might get some folks excited - or not.


Switched to Target Retirement as the newest wrinkle to lifecycle funds when they came out - they get old along with me.

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Re: market-timing fund ?
Old 02-10-2007, 08:55 PM   #6
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Re: market-timing fund ?

They choose to benchmark themselves against a 60/40 index. Not sure alpha means anything when comparing a 100% stock fund to a 60/40 index.
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Re: market-timing fund ?
Old 02-10-2007, 09:54 PM   #7
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Re: market-timing fund ?

This fund is a strange bird. Currently, (per M*) it is invested 80% stock and 20% cash. If you are an investor that prefers to control your own asset allocation, I would steer clear.
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Re: market-timing fund ?
Old 02-10-2007, 11:50 PM   #8
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Re: market-timing fund ?

Like d said, pick your poison. To me this is a valid replacement for an SS&P500 fund which I already have in my retirement account. I have the Asset Allocation (VAAPX) in my Roth IRA for seven years now and it has performed slightly better with a little less volatility than a S&P 500 index, nothing radical. Nothing wrong going with the index fund of your choice but this fund has a long, decent record and if it fits into your personal AA then it is better than a lot of other funds. I see that a lot of Vanguard diehards hate this fund because it is not an index.
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Re: market-timing fund ?
Old 02-11-2007, 12:35 AM   #9
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Re: market-timing fund ?

It is a form of market timing... but not drastic...

If the PE of the S&P 500 rose to 50 or even 100, would you not think the market is highly priced Would you put all of your money into that index??

What if bonds were paying 15% or even 20% at the time Now where would you put your money

There are valid reasons to move a little around when something looks to expensive and something else looks cheap... but since they are doing it on the edge, to me it is not 'market timeing' like I think of it..

Do they have the ability to do true market timing It appears to be 'Yes'... as they can be 100% in any of the classes... but I doubt it would every happen..
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Re: market-timing fund ?
Old 02-11-2007, 01:22 AM   #10
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Re: market-timing fund ?

Quote:
Originally Posted by yakers
Like d said, pick your poison. To me this is a valid replacement for an SS&P500 fund which I already have in my retirement account. I have the Asset Allocation (VAAPX) in my Roth IRA for seven years now and it has performed slightly better with a little less volatility than a S&P 500 index, nothing radical. Nothing wrong going with the index fund of your choice but this fund has a long, decent record and if it fits into your personal AA then it is better than a lot of other funds. I see that a lot of Vanguard diehards hate this fund because it is not an index.
I consider myself a Diehard and I don't hate this fund for not being an index. In fact, I don't hate it at all! It is not right for me because I have a set asset allocation plan and investment plan. This fund doesn't have a set allocation policy, it can swing from 100% stocks to 100% cash or bonds at the drop of a hat. Therefore it has no room in my plan.
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Re: market-timing fund ?
Old 02-11-2007, 01:29 AM   #11
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Re: market-timing fund ?

Morningstar reports:

Standard Index Best Fit Index
Dow Jones Moderate Port S&P 500 TR
R-Squared 82 97
Beta 0.99 0.92
Alpha 0.23 0.66

Dow Jones Moderate Port = 39% bonds 56% stock 5% cash

So, it is relatively similar to the S&P, but with a bit less volatility.
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