Half a day for asset allocation strategy 2024 chapter

Original Butcher1868 Foundation Changhong 2023-12-02 20:42 Published in Guangdong.

High yields require iron-clad discipline.

Alexander Elder.

Money · Logic · Against human nature, the butcher greets you all good evening.

2023 is coming to an end, and it's time to update the logic of the half-day combination.

The logic of the 2024 version of Half a Day is divided into four chapters:

The Chapter of the Tao begins with basic logic, introducing the thinking, schools and cases of asset allocation.

The Chapter of the Law plans the overall layout, explaining the objectives, ideas and variety selection of the strategy.

The Chapter of the Art focuses on actual combat operations and designs the rules for positioning, rebalancing and rebalancing of strategies.

The chapter of the instrument sorts out the selection of varieties, summarizes the selection methods of the strategy and the first list.

Today is the "Chapter of Technique" that focuses on actual combat operations, and the content of this chapter includes ——

The Chapter of the Lawclarifies the goal of the half-day weather strategy:

Under the premise of 0**, the long-term stable appreciation of wealth is realized.

0**: A simple set of rules can work without relying on anyone's experience and judgment.

Long-term: Do not pursue short-term performance for one or two years, and focus on long-term gains across bulls and bears.

Stable appreciation: Risks and drawdowns are as small as possible, creating a solid backing for family assets.

In order to solve these 3 problems, we need two operating principles:

First, sustainability.

Second, it's simple enough.

Let's talk about sustainability first.

Any portfolio is made up of specific varieties, and if the varieties are not sustainable, then the portfolio is unstable and naturally not "long-term".

Charlie Munger says "always think backwards", so let's think about it the other way around: which varieties are not sustainable?

Actively managed**.

The investment style of the active type depends entirely on the manager, and changing the manager is almost the same as changing.

One of the most obvious examples: "E Fund Small and Mid Cap Hybrid" has been heavily positioned in ** blue chips for many years.

Why is this wonderful situation happening?

Because Zhang Kun, who took office 4 years after the establishment of **, prefers **blue chips - he will not buy small and medium-sized caps because his name is "small and medium-sized".

For active managers, the manager is everything, but you can't decide whether the manager stays or not, and your mix is not sustainable.

In addition to this, the active type ** is often usedHijacking

* The manager is powerful, it doesn't mean that the people who buy ** are also powerful.

Greedily subscribed when assets were expensive, and redeemed in horror when assets fell sharply, this is the norm for ordinary people.

Because of the performance pressure and requirements, the manager had to "buy high and sell low", resulting in the fact that the manager was actually hijacked by the flock, showing an obvious tendency to chase up and down.

This question is a butcher in ".Why don't I recommend you to buy active**has been explained in detail, and will not be repeated here.

Eliminate the wrong options and the answer is very simple:

Varieties that are combined in a half-weather combination must be exponentially sustainable**

Of course, the index** is also divided into on-market and off-market, which will be expanded in detail in the "Chapter of the Apparatus".

Let's talk about it simple enough.

A combination of complex strategies that come with asset risk in addition to themExecute a deviation strategyrisk.

The more complex the strategy, the more likely it is to go off the rails when executed, because the executor will always be affected by greed and fear.

On the flip side, a simple enough strategy doesn't leave room for "thinking too much" and is less prone to error.

To sum up: in order to achieve the goal, the half-weather combination has two operating principles: sustainable and simple enough.

"Sustainable" determines that the portfolio will be exponential**, not active**.

Simple enough" is the guiding principle of the half-day combination operation, which is the content of this chapter.

This part of the content was not available in the old version, but later there were more students who followed it, and there were more and more related questions.

This time, a chapter will be devoted to 3 issues:

How do you build your own half-day combination?(Open Position).

There will be new funds in the future, how to add them?(Add Position).

How can I withdraw cash from it if I need it?(Position reduction).

The first is to open a position.

The half-day strategy will combine the funds with each variety according to a certain proportion, and the proportion of the major categories is in ".The Chapter of the Lawexplained that the proportion of subdivided varieties will be announced in the "Chapter of the Apparatus" next week.

If you plan to make a small attempt with 100,000 yuan, and variety A accounts for 5% of the combination, then you only need 5,000 yuan for variety A.

In the same way, the remaining varieties b, c, and d account for %, respectively, then **20,000, 30,000, and 450,000, which adds up to exactly 100,000.

Opening a position is best done in one goDon't use "regular investment" as a smart one

This kind of operation butcher tried in 2019, but it interfered greatly with the rebalancing of the strategy and failed to have a positive effect.

If you have a balance in your monthly salary and want to add it to the half-day combination, you can refer to the method in "Adding Positions".

Remember:The most important profit** of the asset allocation portfolio is rebalancing, and the fewer operations that interfere with rebalancing, the better.

Then there is the increase in positions.

Some students have a monthly salary balance and want to add it to the half-day portfolio in batches as "savings" - which is very common for migrant workers - then you need to increase the position.

After completing the opening of the position, as the various types of assets** continue to fluctuate, their proportion will continue to change, and will not remain at the original "5:20:30:45".

At this time, if you add funds according to the ratio of "5:20:30:45", it will have the effect of "smoothing out the fluctuations".

However, the volatility of assets** brings rebalancing opportunities to buy low and sell high, and smoothing out volatility affects the rebalancing trigger. (Again: "Regular investment" is an operation to smooth out volatility and is not applicable to asset allocation portfolios).

Therefore, the butcher is more inclined to increase the position according to the existing proportion of the asset, for example, after a period of time, the combination ratio becomes "6:17:36:41", and now you want to invest an additional 1000 yuan, then A, B, C, D are ** and 410 yuan respectively.

If you don't add to your position that often, but only once a year or once, you can refer to Section 3 of this chapter for the example of "Additional Investments".

Finally, there is the reduction of positions.

Before retirement, we can use the half-day combination as a piggy bank to save money for retirement.

But if one day you need money urgently, and even the emergency reserve in the "3 wallets" is not enough, and you have to "withdraw cash" from half a day, what should you do?

It can be considered in two cases

If your capital requirement does not exceed the "cash assets" of the portfolio for half a day, you can directly withdraw the "cash assets" for emergency purposes.

After withdrawal, the proportion of assets in the entire portfolio will change, but it does not need to be processed, and it can be adjusted once at the next time the rebalancing is performed.

If your capital needs exceed the amount of "cash assets", then you can reduce your position according to the existing proportion of the assets and withdraw them in an emergency.

For example, after a period of time, the asset ratio of the portfolio is "6:17:36:41", and you want to withdraw 1,000 yuan for emergency, then A, B, C, and D can be sold and 410 yuan respectively.

After the fact, the funds are abundant, and you can buy them back according to the latest asset ratio, and deal with them according to the method of adding positions.

Butcher's note: The sell operation is calculated by "share" rather than "amount", for example, if you want to sell 60 yuan and the current net value of variety A is 15, then the actual operation is "sell 40 copies" (60 15)。Trading will also involve redemption fees and selling commissions, which will not be repeated here.

There are only two things involved in the establishment and reduction of positions in the half-day strategy:

Target Ratio] is a strategy set for position opening and rebalancing.

The existing ratio is subject to change at any time and is used to add and reduce positions.

After mentioning "rebalancing" so many times, it's time to introduce this mechanic

The so-called rebalancing is to take all assetsRevert to the target scale

In the half-day portfolio, the target ratio of large asset classes is "5:20:30:45", i.e. cash: alternatives: bonds: **= 5:20:30:45.

Over time, the asset** will fluctuate, and the actual proportion will inevitably shift

The same is **, the proportion of assets that rise more will rise, and the opposite will happen if they rise less.

The same is **, the proportion of assets that fall more will decrease, and the opposite is true for those that fall less.

On one side, on the other side, then the deviation of the proportion of the two assets will be more obvious.

Rebalancing the share of assets back to the original target is rebalancing.

How the hell is it "restored"?Let's look at an example.

Let's assume that a combination has only two varieties, A and B, and the target ratio is 50:50.

The whole portfolio invests 100 yuan when opening a position, so A and B each have 50 yuan.

After a while, a rose and became $60;And b**, it became 40 yuan, so the ratio became 60:40.

At this time, to rebalance, you should sell some A, ** and some B.

If you want to keep the amount unchanged, you can sell A worth 10 yuan, and then **10 yuan B, the total amount of the combination is still 100 yuan, and A and B return to 50:50.

If you want to invest additional funds, then you can choose not to sell A, only **20 yuan B, the total amount of the combination increases to 120 yuan, A and B 60 yuan each, the ratio is still 50:50.

Regardless of which method is used, the proportions of the entire portfolio will revert back to the original target. *

Butcher's note: Details such as subscription and redemption fees and redemption share calculations are omitted here.

It is not difficult to see that rebalancing is a kind of buying low and selling high :

*After the "more expensive" asset A, the position will be reduced.

* After the "cheaper" asset B, get an increase in position.

You can also substitute the situation of "AB has risen, A has risen more than B", "AB has fallen, A has fallen less than B" and so on, and the treatment is the same.

Attentive students may have a question when they see this:

If all assets are in, will the rebalancing becomeCut the meat

And the answer to the question is hidden in the "cash".

The Chapter of the LawAs mentioned in the book, cash assets have two functions: to provide liquidity and to return on assets.

The aforementioned "cash withdrawal from cash assets first" means that cash assets provide us with liquidity.

As for the asset return scale, imagine ——

When all assets are in order**, if there is no cash in the portfolio, but rebalancing is triggered, the assets that have fallen less may need to be "cut and sold".

If there is cash in the portfolio, the proportion of cash assets in the portfolio will rise rapidly, and it is just "selling cash" to cover the position.

With the scale of cash, there is a yardstick for the rise and fall of assets, and it is not easy to "cut meat at a low level" and "take over at a high level".

There are two triggers for rebalancing of asset allocation portfolios:Rebalance regularlywithThreshold rebalancing

Rebalance regularlyIt is performed on a regular basis, and it is usually recommended to do regular rebalancing once a year, up to once every six months.

Threshold rebalancingIt is to set a threshold to determine when to trigger rebalancing based on the degree of deviation in the proportion of assets.

Which of the two methods is better?

AncientPermanent PortfolioAdoptionThreshold rebalancing: It sets a target ratio of 25% for four assets, with a 15-35% adjustment band, and triggers rebalancing when either asset is below 15% or above 35%.

However, the "15 35%" mentioned in the book has not been verified by empirical data and is not a reliable quantitative value.

To put it bluntly, it is "patting the head", and it is very filmedUnscientific"From 25% to 35%" and "from 25% to 15%" are not equivalent.

Dalio's lite version for individual investorsRound-the-clock strategyJust doRebalance regularly, David SwensonScarecrow comboNot even mentioning the rebalancing ......

The butcher has also done some research on this issueThe jury is still out in the industry.

Half a day of public operation for more than four years, many students have given rebalancing threshold suggestions, but ——

There is no data backing up, no backtesting verification, and even logical loopholes.

To put it bluntly, these so-called "suggestions" are just guesses......

*: "Hurricane").

Anyway, it's all guessing, so let's take a look at the rebalancing method summarized by the butcher based on first-hand data:

First, the half-day strategy uses both periodic rebalancing and threshold rebalancing.

Second, the time for regular rebalancing is April to May of each year.

This time happens to be after the release of the first quarterly report, and we can first conduct an annual inventory, and replace the problematic ones during regular rebalancing. (See See.)Half a day to wait for ** inventory 2023

If the threshold rebalancing has been triggered in the past 12 months, suspend a regular rebalancing to avoid excessive rebalancing that will cause a lot of friction costs and affect the portfolio performance.

Third, the threshold for threshold rebalancing is 25%, and any asset whose share shifts beyond the threshold triggers a rebalancing.

The metric is "Asset Percentage Shift" and is calculated as follows:

Asset Percentage Offset = Current Percentage Target Ratio - 1

Assets with a target ratio of 10% and more than 125% or less than 75%, rebalancing is triggered. (10%×(1+25%) = 12.5%， 10%×(1-25%) = 7.5%)

Assets with a target ratio of 30% and more than 37% of the portfolio5% or less than 225%, rebalancing is triggered. (30%×(1+25%) = 37.5%， 30%×(1-25%) = 22.5%)

How did the value of "25%" come about?

Interested students can read this content ——

This paragraph is all math, and if you don't like it, you can skip it

Since there is an "anchor" of cash in the portfolio, we can make a trial balance to test the overall rise and fall of the portfolio under different thresholds, so as to choose a more reasonable threshold.

The calculation is as follows: Let the proportion of cash assets offset be x,x [0, 1], then:

When the proportion of cash assets shifts positively to +x, the overall portfolio** 1-1 (1+x).

When the proportion of cash assets is negatively shifted to -x, the overall portfolio ** 1 (1-x)-1

Butcher's note: The detailed derivation process is attached at the end of the article, and interested students can deduce it by themselves.

Let x% be substituted into the above formula, and the trial balance can be obtained as follows:

20% and 40% are used thresholds for half a day in the old version, and neither works well.

For a more detailed discussion of rebalancing thresholds, please refer toHow exactly is the rebalancing threshold determined?withHalf-day combination adjustment rebalancing thresholdThese two articles.

The math part is over, and you can read it below

According to some backtest data reports,Rebalance regularlywithThreshold rebalancingThe long-term earnings gap is not significant.

There's no need to dig into this issue, and your energy should be spent on areas that will increase your returns.

A simple conclusion is:If you want to save your mind, you can "regular", and if you want to make more money, you can use "threshold", and you can do it at the same time.

One thing to note: the rebalancing frequency should not be too high.

Empirical studies have shown that if the frequency of rebalancing is higher than once every six months, the return of the asset allocation portfolio will be reduced.

It's not hard to see why

Every rebalancing will generate transactions, and there are friction costs (redemption fees, etc.), and frequent transactions will naturally reduce returns.

Of course, the scope of the discussion here is limited to asset allocation portfolios.

Finally, I add 3 practical tips to help you better handle rebalancing.

The first trick: the amount of rebalancing is calculated.

Rebalancing requires the calculation of the percentage of each asset, and the amount of the asset is dynamic.

Generally speaking, the butcher directly uses the ** price of the previous trading day as the basis for calculation.

The rule of an on-exchange ETF is "sell by amount** and by share", so the selling in rebalancing still needs to be converted simply:

Shares to be sold = Amount to be sold **Net value.

In fact, you can't get enough of this kind of error

The next second after the rebalancing is performed, all the amounts change again.

Considering the trading commission and redemption fee, the OTC index** is delayed by one trading day, and the QDII net value update time is delayed by ......

We cannot change these factors, we can only accept the "vague right", not "precision for the sake of precision".

Of course, some errors can be controlled, such as choosing an on-exchange ETF over an off-exchange index**.

OTC indices** are confirmed one trading day later, while on-exchange ETFs are confirmed in real time.

OTC indices** only track the index at most 95%**, while ETFs have a 100%** error that is even smaller.

The transaction cost of an on-exchange ETF is only 5% of that of an off-exchange ETF (see ".What is the difference between on-market and off-market for the same index**?

In addition to this, there is ——

The second tip: the execution time of rebalancing.

Let's start with the conclusion: give preference to the week.

Three, four, five.

This is related to the time when the net value of QDII** is updated

The half-day strategy is an asset allocation strategy that invests in global markets, and the start times of global markets are different, resulting in a delay in the NAV update time of QDII**.

Most of the overseas investments involved are QDII**, such as the S&P 500 or oil ETFs in the US stocks. For OTC QDII, the net value seen before Monday is actually last Thursday's data, and what is seen on Tuesday is last Friday's data, with an error of up to 4 days.

Only on Wednesday and Friday, the data error can be controlled within 2 days, and the indicators calculated before the rebalancing are more accurate.

If you are not afraid of trouble, you can also estimate the latest net value of QDII** through the rise and fall of the index, but after all, it is an estimate and cannot solve this problem perfectly.

So, the easiest and most straightforward way is:

Try to be in the week.

Three, four, and five perform rebalancing.

The third trick: rebalancing funds in and out.

In the example in section 3, the butcher actually gives two rebalancing schemes according to the different funds**.

Keep the amount the same" belongsStock rebalancingIn the case, there are usually ** and also sell;

Additional investment funds" belongsIncremental rebalancingIn the case, it is possible to only ** not sell.

Stock rebalancing is more in line with the characteristics of "buy low and sell high", while incremental rebalancing is a bit of a "only in but not out" meaning.

In general, stock rebalancing is preferred, so that the "more expensive" assets have the opportunity to sell floating profits and settle for safety.

There are no absolutes in everything, and for salaried people who continue to have capital inflows, incremental rebalancing can invest funds in "less expensive" varieties, which will be more scientific than simply investing in the portfolio.

The Butcher himself will add money to the half-day mix every year, and the annual regular rebalancing will be usedIncrementalway;Threshold rebalancing, which is triggered by market volatility without a fixed schedule, is more often usedStockway;

At this point, the strategy of the 2024 version of the half-day wait has been almost explained.

The "Chapter of the Apparatus" that will end next week will answer the last and most concerned question -

The 2024 version of the half-day weather strategy, which ** varieties have been chosen?

The cash target ratio a, the proportion offset x [0, 1], makes the portfolio initially 1.

If the percentage of cash is offset by +x, then:

Existing proportion of cash = a * 1+x).

Amount of portfolio = a [a * 1+x)] = 1 (1+x).

Portfolio Assets**Magnitude = 1 - 1 (1+x).

If the percentage of cash is offset by +x, then:

Existing proportion of cash = a * 1+x).

Amount of portfolio = a [a * 1+x)] = 1 (1+x).

Portfolio Assets**Magnitude = 1 (1-x) -1

In summary, the rise and fall of the portfolio can be deduced by the offset of the proportion of cash x and has nothing to do with the target ratio of cash a.

Substituting different x values can obtain the overall rise and fall of the combination under different offset assumptions, that is, the results in the trial balance.