Winning By Not Losing
I published a paper last year to focus on the topic in the title of this blog post - "A Quant Approach to TAA". It took inspiration from the Policy Portfolios of the Harvard and Yale endowments to come up with a simple strategic asset allocation - 20% each in US Stocks, Foreign Stocks, US Government Bonds, REITs, and Commodities. This portfolio can be easily implemented with low-cost ETFs or mutual funds, and rebalanced every so often. It then applied a smiple tactical overlay to reduce risk and drawdowns - ie winning by not losing. This technique would have had you out of US Stocks the end of 2007, out of Foreign Stocks the end of January, and out of REITs way back in June of last year. And of course you would still be happily in 20% bonds, 20% commodities, and 60% cash.
Follow the link in the paragraph quoted to find Faber's paper.
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