A recent article extolling the benefits of go-anywhere, macros funds piqued our interest.
We researched over 150 asset allocation strategies to find Portfolio Recipes using ETFs that would beat the leading macro mutual fund.
We found 43 Portfolio Recipes that beat the top macro fund with both lower risk and higher return.
A recent article in Barron's, "The Case for Macro Funds" (published February 20, 2017, subscription required) got us thinking about "go anywhere" macro funds that allocate assets globally based on market conditions.
The Barron's article makes the case that owning macro funds could insulate your portfolio during the next bear market.
Macro fund managers use a top-down approach and look at broad macro-economic factors to make their investment choices. In contrast, other active managers may use a bottom-up approach and pick stocks by filtering and analyzing hundreds of opportunities to find the best buys.
The Barron's article mentions the following three funds:
Eaton Vance Richard Bernstein All Asset Strategy Fund Class A (MUTF:EARAX)
Dreyfus Global Real Return Fund Class A (MUTF:DRRAX)
William Blair Macro Allocation Fund Class N (MUTF:WMCNX)
But how well have these funds actually performed?
When considering fund performance, we want to look at both total return and risk. But a problem is that all three of these funds have less than 10 years of history. In other words, none of these funds were around during the last major market downturn in 2008. So we can't see how they performed during that stressful market cycle.
The Macro Fund to Beat
So is there a macro fund that would be suitable? For our analysis, let's find a Global Macro fund that has at least 10 years of history. Morningstar does not have a specific category for Macro funds, but Thomson Reuters Lipper does have a category called "Alternative Global Macro Funds." This should work for our investigation.
The Lipper 2016 Trophy Winner for Alternative Global Macro Funds with 10 years of history was WYASX, Waddell & Reed Advisor Asset Strategy Fund Class Y.
The 2015 winner in this same Lipper category was UNASX, which is the "A" share class of this same fund, so we know Lipper definitely likes this fund.
So let's use WYASX as our "macro fund to beat." This fund holds a mix of U.S. and international stocks and bonds. According to the prospectus, this fund "may invest its assets in any market that the fund's investment manager believes can offer a high probability of return or, alternatively, can provide a high degree of relative safety in uncertain times." So this is a go-anywhere, actively managed fund.
Note that WYASX is sold only through advisors and it's not available for direct purchase by retail investors. But we can still use it as the one to beat, since we're using it as a benchmark and we're probably not planning on buying WYASX. We will look for tactical Portfolio Recipes that beat WYASX using a set of ETFs. The ETF portfolios that we're looking for will be 100% investable by individual investors.
The Performance of WYASX
Exhibit A (below) shows the 10-year performance of WYASX, SPY (as a proxy for the S&P 500 index), and VBIAX (Vanguard Balanced Index Fund)
Exhibit A. 10-year Performance of WYASX, SPY, and VBIAX (source: Morningstar)
For the 10 years ending January 31, 2017, WYASX (the blue line in Exhibit A) generated a total annual return of 5.7%. This percentage return could be good or bad, depending on the level of risk. We need more context to examine the risk.
As a measure of risk, we like to use Maximum Drawdown, which is the peak-to-valley drop in value for the portfolio over a given period. We like to look at maximum drawdown over the past 10 years since that includes the last major market downturn. In our view, looking at Maximum Drawdown over only the past 5 or 7 years is not meaningful since it excludes 2008.
Looking at the past 10 years, WYASX has a maximum drawdown 29.8%.
For comparison, Exhibit B (below) shows the 10-year total return and maximum drawdown for WYASX, SPY (the S&P 500 ETF), and a Balanced Portfolio Recipe that is 60% stocks and 40% bonds (nicknamed s.6040).
Exhibit B. Risk and Return for WYASX vs. Benchmarks
10-year total return
10-year maximum drawdown
Waddell & Reed Advisor Asset Strategy Fund Class Y (MUTF:WYASX)
We can see that WYASX underperforms both SPY and s.6040 in terms of total return, but WYASX has less drawdown. So with this small comparison set, WYASX loses in terms of return, but wins in terms of drawdown.
Hunting for a Portfolio Recipe Algorithm that beats WYASX
Now let's look at a larger set of investing algorithms, which we call "Portfolio Recipes." We can take WYASX's 10-year total return and its 10-year maximum drawdown, then look for Portfolio Recipes that beat WYASX in terms of both risk and return. In other words we want to find lower risk, higher return portfolios.
Exhibit C (below) plots the results for over 150 different Portfolio Recipes that we track at recipeinvesting.com. Each dot represents one Portfolio Recipe: the total return is plotted on the vertical axis and risk is plotted on the horizontal axis. WYASX is shown as an orange dot. The time period for the chart is 10 years ending January 31, 2017.
So any Portfolio Recipes above and to the left of the orange dot (in the green shaded region) will have both higher return and lower risk compared to WYASX.
There are 43 Portfolio Recipes in the green shaded region. We can see that SPY (the dark blue dot) and the 60/40 portfolio (the bright pink dot) fall outside the green region.
The Winning Algorithms
Exhibit D (below) lists the Top 3 Portfolio Recipe algorithms, ranked by highest annual return. All of these beat WYASX in terms of both risk and return. These are tactical ETF portfolios that are updated monthly based on the underlying algorithm. These are the three Portfolio Recipes closest to the top of the green-shaded box shown in Exhibit C.
The current asset allocation for each Portfolio Recipe is also shown, but this can change from month-to-month since these are tactical portfolios that are rebalanced at the beginning of each month.
Exhibit D. Top 3 Portfolio Recipes (based on Total Return) that Beat WYASX, the Top Macro Fund
Pure Momentum Portfolio (ID = t.pure)
Annual Total Return = 18.3%
Maximum Drawdown = 26.2%.
Current allocation for Feb 2017 is IWM=100%
Despite strong 10-year performance numbers, this Portfolio Recipe has underperformed during the last several years including a weak 0.3% return over the past 12 months.
Current allocation for Feb 2017 is EFA=7.73%, EEM=0.15%, QQQ=48.05%, GLD=44.07%
This recipe has returned 18.8% return over the past 12 months.
For a slightly different take, let's look at the winning Portfolio Recipes with the lowest risk. These are shown as dots closest to the left edge of the green box in Exhibit C.
We can see in Exhibit E (below) the Top 3 Portfolio Recipe algorithms, ranked by lowest Maximum Drawdown. All of these beat WYASX in terms of both risk and return. These are tactical ETF portfolios that are updated monthly based on the underlying algorithm.
Exhibit E. Top 3 Portfolio Recipes (based on Risk ) that Beat WYASX, the Top Macro Fund
Minimum CVaR (Conditional Value at Risk) Portfolio (t.cvar)
Annual Total Return = 9.1%
Maximum Drawdown = 11.0%
Current allocation for Feb 2017 is TLT=11.77%, SPY=46.99%, EFA=11.3%, QQQ=2.28%, GLD=27.66%
Target 12% Return Portfolio using Standard Deviation (t.tret)
Annual Total Return = 11.8%
Maximum Drawdown = 11.2%
Current allocation for Feb 2017 is TLT=0.34%, SPY=78.2%, GLD=21.46%
Current allocation for Feb 2017 is TLT=15.24%, SPY=63.98%, GLD=20.78%
The actively managed "macro" fund WYASX has a compounded annual growth rate of 5.7% per year over the past 10 years, with a 29.8% drawdown. But we found 43 Portfolio Recipe algorithms using recipeinvesting.com that have outperformed this macro fund in terms of both lower risk and higher return.
Creating a tactical portfolio using ETFs can potentially offer some of the benefits of a macro-style fund. An ETF Portfolio Recipe can offer global, tactical asset allocation without the disadvantages shown by WYASX such as limited retail availability, higher cost, higher risk, and underperformance.
There is one metric that many mutual fund providers avoid: Maximum Drawdown.
Maximum Drawdown measures the largest peak-to-trough fall in value for a portfolio.
But we can use this metric and the MAR Ratio to evaluate the risk vs. return trade-off, and separate the winners from the losers.
We identify portfolio recipes with annual returns ranging from 4.2% to 14.8% that have a better-than-average MAR Ratio.
What is the metric that mutual fund providers fear?
This metric has the power to make a decent-looking fund or portfolio look quite dreadful. You can't find this metric on the websites of Morningstar, Yahoo, Vanguard, or Fidelity.
The metric is Maximum Drawdown.
"Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period and is usually quoted as a percentage of the peak value," according to the asset management firm Robeco.
In other words, it's a portfolio's greatest loss in value over the time period you're considering.
For our analysis, the Maximum Drawdown is based on the total monthly return, including distributions. Because Maximum Drawdown is by definition "extreme," it allows investors to see the worst-case that a portfolio has suffered.
Other risk metrics like standard deviation, while popular, can average out and thereby disguise periods of poor performance. Additionally, standard deviation penalizes portfolios by treating downside deviation (which is bad) and upside deviation (which is good) equally.
Fidelity.com's mutual fund screener includes Sharpe ratio, standard deviation, beta, and R-squared... but not maximum drawdown.
Vanguard.com provides a sparse set of risk metrics for each mutual fund: R-Squared, Beta, and a "Risk Potential" score. The "Risk Potential" ranges from 1 (low risk) to 5 (high risk). Maximum drawdown is not shown.
Why is this a feared metric?
This metric would put many mutual funds and actively managed portfolios in an unfavorable light. Fund providers don't want to point out the Achilles' heel of their funds. To be fair, the fund providers are not obscuring or hiding the data, but it's not always easy to find.
A savvy investor needs to be aware of the Maximum Drawdown for any investment under consideration.
Let's look at an example from Vanguard. Exhibit A (below) shows a graph that Vanguard publishes on Vanguard.com.
Exhibit A. Hypothetical growth of $10,000 invested in Vanguard Diversified Equity Fund (MUTF:VDEQX) over the past 10 years
By looking at the graph's underlying data (available by hovering over the graph on the Vanguard website) we can see a peak value of $11,127.66 in 2007 followed by a low value of $5,318.39 in early 2009.
This is 52.2% drawdown from a fund with "Diversified" in its name. It took the fund about 3 years to recover from that drawdown. Caveat emptor!
Another reason this is a feared metric: it could frighten investors...and rightly so. A quote from a RecipeInvesting.com subscriber sums up the difficulty of owning a portfolio with a large maximum drawdown:
"When you see 25, 30, 40% drawdown… you feel so helpless. As you get older, you don't have the luxury of waiting and watching."
Let's look a few more fund examples. By looking at the names or annual total returns for the funds below, we might expect them to be less risky.
But we can see a more complete picture by looking at the Maximum Drawdown: these funds each suffered a dramatic drop in value during the last market downturn. Examples for the 10-year period ending January 31, 2017:
T. Rowe Equity Income Fund (MUTF:PRFDX) has a Maximum Drawdown of 53.2% and annual return of 5.5%.
Sound Mind Investing Fund (MUTF:SMIFX) has a Maximum Drawdown of 50.7% and annual return of 5.3%.
Vanguard LifeStrategy Growth Fund (MUTF:VASGX) has a Maximum Drawdown of 47.6% and annual return of 4.7%.
UBS Global Allocation Fund (MUTF:BPGLX) has a Maximum Drawdown of 48.7% and annual return of 2.6%. This fund has the rather unappetizing combination of low return and a large Maximum Drawdown.
Many active funds and index funds struggled during the 2008 downturn. These fund managers dutifully pressed onward using their investment mandates. But investors should still ask the tough questions:
What is the risk level that I am accepting by investing in a specific fund or Portfolio Recipe?
Am I getting enough return for the risk I'm bearing?
Where can I find maximum drawdown stats?
Several web sites do publish maximum drawdown calculations, such as RecipeInvesting.com, Portfolio Visualizer, or Ycharts. You can also run the calculation yourself, as described below
How to peform a Maximum Drawdown calcuation
Obtain monthly returns going back as far as you can get.
Calculate the hypothetical value of the portfolio from month-to-month, using the total monthly return for each month. The total monthly return should include dividends and distributions. For example, start with $10,000 prior to your first month of data and then increase your portfolio value by the first month's percent return. Then repeat this for all subsequent months.
Find the maximum peak-to-trough drop in value over the period you're considering. We suggest looking at least at the last 10 years so that you include the last major market drop in 2008.
Express the drop in value as a percentage. This is the maximum drawdown.
How can I invest more wisely using Maximum Drawdown?
First, be aware of Maximum Drawdown (looking back 10 years or more) before investing in any portfolio or fund. Be sure the Maximum Drawdown calculation includes data from 2007-2008, since this was the period of the last major market downturn. Make sure you are comfortable with the level of risk.
Next, use the MAR Ratio to separate the winner from the losers. The MAR Ratio compares maximum drawdown to annual return. It measures how much return you get compared to the portfolio's maximum drawdown. You can calculate MAR for a portfolio by dividing its Compound Rate of Return (i.e., CAGR or Annual Total Return) by the portfolio's maximum drawdown.
MAR = (Compound Annual Growth Rate) / (Maximum Drawdown)
The MAR Ratio's name comes from the Managed Accounts Report newsletter, which was founded in 1979 and published by Leon Rose. In our analysis, we use the past 10 years for MAR calculations, but another approach is to use all the available historical data since a fund's inception.
When considering MAR, the rule is: the greater the MAR, the better.
If a portfolio had a maximum drawdown of 15% and an annual return of 10%, then MAR = 10/15 = 0.67
If a portfolio has a maximum drawdown of 24% and an annual return of 6%, then MAR = 6/24 = 0.25
Let's look at some real-life examples of MAR:
S&P 500 (NYSEARCA:SPY), has a maximum drawdown of 50.8% and annual return of 6.9%. Therefore, its MAR is 0.14.
U.S. Aggregate Bonds (NYSEARCA:BND), has a maximum drawdown of 4.0% and annual return of 4.3%. We can calculate its MAR to be 1.08.
BPGLX, as mentioned above, has a maximum drawdown of 48.7% and annual return of 2.6%, resulting in an abysmal MAR of 0.05.
Vanguard LifeStrategy Growth has a maximum drawdown of 47.6% and annual return of 4.7%, and MAR of 0.10.
Some investment professionals have suggested that investments should have a MAR of 1.0 or greater. However, that is a tight filter that not many portfolios will achieve. Additionally, with higher risk comes higher return, so an investor wanting higher returns must be willing to accept higher risk. Could a portfolio with an average return of 10% per year have a Maximum Drawdown of just 10%? It's possible, but this is a high hurdle.
So while we are certainly on the lookout for portfolios with MAR above 1.0, let's loosen the constraint to be "MAR greater than 0.5" and see what that filter produces.
What are some top portfolios after considering maximum drawdown?
We ranked all the Portfolio Recipes that we track at RecipeInvesting.com, and ranked them by MAR.
We found 29 Portfolio Recipes with a MAR of 0.5 or greater. In other words, for these 29 Portfolio Recipes, the maximum drawdown over the past 10 years was not more than twice the compound annual return over the same period.
The top Portfolio Recipes, ranked by MAR, are listed below. Note that most of the strategic (i.e., static, buy-and-hold) Portfolio Recipes did not have a MAR greater than 0.5. Listed below are the Top 3 Portfolio Recipes in three categories: DIY Tactical, DIY Strategic, Managed Funds.
Top DIY Tactical Portfolio Recipes, based on MAR
The percentages reflect the past 10 years ending Jan 31, 2017.
Adaptive Allocation F (t.aaaf). Annual return = 14.8%, Max Drawdown = 13.4%, MAR = 1.1
Target Return 12% (t.tret). Annual return = 11.8%, Max Drawdown = 11.2%, MAR = 1.05
Target Return Post-Modern (t.trdd). Annual return = 11.7%, Max Drawdown = 12.5%, MAR = 0.94
Top DIY Strategic Portfolio Recipes, based on MAR
The percentages reflect the past 10 years ending Jan 31, 2017.
Harry Browne inspired Portfolio (s.brow). Annual return = 6.3%, Max Drawdown = 12.6%, MAR = 0.50
Permanent Plus Portfolio (s.plus). Annual return = 8.0%, Max Drawdown = 17.1%, MAR = 0.47
No Equity Portfolio (s.noeq). Annual return = 7.0%, Max Drawdown = 19.5%, MAR = 0.36
Top Managed Funds Recipes, based on MAR
The percentages reflect the past 10 years ending Jan 31, 2017.
EatonVance Global Macro (MUTF:EIGMX). Annual return = 4.2%, Max Drawdown = 3.0%, MAR = 1.4
Fidelity Muni (MUTF:FHIGX). Annual return = 4.3%, Max Drawdown = 7.0%, MAR = 0.61
Vanguard Long-Term Tax-Exempt (MUTF:VWLTX). Annual return = 4.4%, Max Drawdown = 7.2%, MAR = 0.61
Ignore Maximum Drawdown metric at your peril. A portfolio's Maximum Drawdown is often omitted on websites and you may need to seek an alternate source or perform your own calculation.
When choosing Portfolio Recipes, consider using MAR, which is the ratio of annual return to Maximum Drawdown. Our research revealed dozens of Portfolio Recipes that have a MAR greater than 0.5 and annual returns ranging from 4.2% to 14.8%.
The Permanent Portfolio is an approach to creating a diversified portfolio using a static asset allocation.
This approach to investing has been implemented by a mutual fund and an exchange-traded fund.
We examine risks and benefits of this approach and evaluate other asset allocation methods that produce better results with less risk.
We identify 8 portfolio recipes which outperform the Permanent Portfolio on the basis of both lower risk and higher return.
These include 3 tactical ETF portfolios, 2 static ETF portfolios, and 3 mutual funds.
"It's not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for."
- Robert Kiyosaki
The idea of a "Permanent Portfolio" may tempt some investors. The premise is simple: invest in a carefully chosen collection of non-correlated assets and occasionally rebalance. It's easy, but how does it perform? And what are the risks?
One implementation of this approach is the Permanent Portfolio mutual fund (MUTF:PRPFX). This fund opened in 1982 and invests in a diversified (but static) mix of conventional and alternative assets. This gives investors access to a reduced equity portfolio that uses a "permanent," fixed allocation designed to weather a variety of market conditions.
This fund has a target allocation of gold (20%), silver (5%), Swiss Francs (10%), real estate and natural resource stocks (15%), aggressive growth stocks (15%), and dollar assets (35%). The actual portfolio allocation may vary slightly over time, but it maintains its target allocation as a basis of investing. A similar approach is available in an ETF: the Global X Permanent ETF (NYSEARCA:PERM).
Questions to Answer
In this article we'll answer the following questions:
What are some of the advantages of the Permanent Portfolio?
How is it correlated with other asset classes?
What other portfolios beat the Permanent Portfolio in terms of both risk and return?
Question 1. What are some of the advantages of the Permanent Portfolio?
Firstly, we can note that the Permanent Portfolio is not setting any records for total return. Exhibit A (below) shows a modest annual 2.0% return over the last five years. The fund's stated objected is to "preserve and increase the purchasing power value of its shares over the long term." Over the last decade, this chart points more to "preserve" rather than "increase."
Exhibit A. Total Return over the past 5 years
Exhibit B (below) adds the 10-year return and we start to see a bit more benefit. In the far right column, PRPFX has an 5.1% annual return over the past 10 years, compared to SPY's 6.9% return.
Exhibit B. Total Return over the past 10 years
However, PRPFX offers considerably less drawdown over the past 10 years when compared to SPY.
Exhibit C (below) shows Maximum Drawdown (the peak-to-trough change in portfolio value, based on total return) for PRPFX vs. a few benchmarks. The 19.1% maximum drawdown is considerably less than SPY's 50.8% drawdown.
Exhibit C. Maximum Drawdown over the past 10 years
PRPFX also has a lower correlation to some asset classes, which we will investigate next.
Question 2. How is the Permanent Portfolio correlated with other asset classes?
Exhibit D (below) shows the correlation of PRPFX to benchmarks. The Permanent Portfolio has a positive, but moderate, correlation to bonds (NYSEARCA:BND) and stocks (NYSEARCA:SPY). The correlation to gold (NYSEARCA:GLD) remains strong at 0.71 or higher for all periods.
Exhibit D. Correlation of the Permanent Portfolio to Benchmarks
Question 3. What other portfolios beat the Permanent Portfolio in terms of both risk and return?
Let's look for asset allocation approaches (or "Portfolio Recipes" as we call them) that outperform PRPFX on the basis of both risk and return. At Recipeinvesting.com, we track over 200 portfolio recipes in three main categories: a) tactical, do-it-yourself ETF Portfolio Recipes, b) static, do-it-yourself ETF Portfolio Recipes, and c) professionally managed funds. The portfolios we're interested in appear in the green-shaded region in the Exhibit E scatterplot (below).
Exhibit E. Risk vs. Return for Various Portfolio Recipes
The yellow dots in the scatterplot represent the Portfolios Recipes we track at Recipeinvesting.com. We can see several in the green-shaded area that outperform the Permanent Portfolio. The orange dot represents the Permanent Portfolio: over the past 10 years (through December 31, 2016), the Permanent Portfolio has an annual return of 5.1% with a maximum drawdown of 19.1%.
Let's look at specific portfolios in the green-shaded area that outperform the Permanent Portfolio.
a. Tactical Portfolio Recipes using ETFs
These are ETF model portfolios that are updated monthly based on an underlying algorithm. There are 30 tactical portfolios in the green-shaded region which outperform the Permanent Portfolio, but we will highlight only three here.
Adaptive Allocation F Portfolio (t.aaaf) has an annual return of 14.7% over the past 10 years with maximum drawdown of 13.4%. The current asset allocation for this Portfolio recipe is DBC=42.01%, EEM=0.02%, IWM=0.03%, QQQ=4.51%, SPY=53.43%. This portfolio's algorithm ranks 9 asset class ETFs and picks the top 5 ETFs based on total return over the past 180 trading days. Then it chooses a weight (percentage allocation) for each of the 5 chosen ETFs in such a way that the overall portfolio's volatility is minimized using a minimum variance algorithm. The minimum variance algorithm uses standard deviation with a lookback period of 20 trading days.
Minimum Mean Absolute Deviation Portfolio (t.madm) has an annual return of 9.6% over the past 10 years with maximum drawdown of 11.2%. The current asset allocation for this portfolio recipe is GLD=28.47%, SPY=56.46%, TLT=15.07%. This portfolio's algorithm chooses an allocation from a set of 8 asset class ETFs which minimizes the mean absolute deviation. The algorithm uses a lookback period of 80 trading days.
Minimum Variance Portfolio A (t.mvar) has an annual return of 9.5% over the past 10 years with maximum drawdown of 11.2%. The current asset allocation for this portfolio recipe is GLD=25.43%, SPY=52.31%, TLT=22.26%. This portfolio's algorithm creates a covariance matrix that includes the covariance of each possible pair of assets from a set of 8 asset class ETFs. The lookback period for calculating the covariance is 80 trading days. The algorithm then solves to find the combination of asset weights (i.e., percentage allocations) that gives the portfolio the lowest overall covariance.
b. Strategic Portfolio Recipes using ETFs
These are static ETF model portfolios with ingredients that do not change month-to-month but are rebalanced monthly to match the target allocation. Two strategic portfolios outperformed the Permanent Portfolio.
Harry Browne-Inspired Portfolio (s.brow) has an annual return of 6.2% over the past 10 years with maximum drawdown of 12.6%. This portfolio allocates equally to stocks using the Vanguard Total Stock Market ETF (NYSEARCA:VTI), the long-term U.S. Treasury index using the iShares 20+ Year Treasury Bond ETF (NYSEARCA:TLT), cash (represented by the iShares 1-3 Year Treasury Bond ETF (NYSEARCA:SHY), and gold .
Permanent Plus Portfolio (s.plus) has an annual return of 7.8% over the past 10 years with maximum drawdown of 17.1%. This portfolio starts with Harry Browne's 4-part portfolio, but then removes the cash component to increase the portfolio's total return. The recipe allocates one-third each to VTI, TLT, and GLD. Once cash is not a part of the portfolio the risk increases somewhat but the annual return improves.
c. Active managers
These are actively managed funds with professional managers.
Vanguard Wellesley Investor (MUTF:VWINX) has an annual return of 6.8% over the past 10 years with maximum drawdown of 18.8%.
Hundredfold Select (MUTF:SFHYX) has an annual return of 5.8% over the past 10 years with maximum drawdown of 16.8%.
Fidelity Strategic Income (MUTF:FSICX) has an annual return of 5.7% over the past 10 years with maximum drawdown of 16.2%.
While the Permanent Portfolio does offer simplicity, there a better investment alternatives to the Permanent Portfolio, based on our research at RecipeInvesting.com
For "set it and forget it" investors, three mutual funds offer professional management without needing to rebalance.
For investors looking for an easy-to-maintain ETF portfolio, s.brow and s.plus offer a similar approach to PRPFX, but with better results.
For investors or advisors willing to rebalance monthly, the Portfolio Recipes t.aaaf and t.mvar offer the prospect of much higher return with less risk.