Allocate Smartly Review

 

This post is an honest Allocate Smartly review which I’m writing after three years of using Allocate Smartly for investing several of our portfolios. 

What is Allocate Smartly exactly? Allocate Smartly provides information to analyze investment strategies along with the tools to help investors implement those strategies in their own portfolios.

If you’ve been looking for a way to invest that:

• Costs a fraction of financial advisor fees yet uses a professional investing strategy
• Takes less than half an hour a month to implement
• Has handily beaten a 60-40 stock and bond index buy and hold portfolio with considerably less risk…

Then you’ll want to check out the strategies at Allocate Smartly because some of them have done just that. Not only this, but they also look like they have the potential to continue to outperform a buy and hold index portfolio with less risk.  

In this Allocate Smartly review, I’ll share:

• The pros and cons of using Allocate Smartly based on my own experience and that of my financial coaching clients
• Past results of the portfolio I created on Allocate Smartly
• Who will benefit the most from Allocate Smartly 
• The type of investor that doesn’t need Allocate Smartly
• What has the most impact on investment returns and how Allocate Smartly helps capitalize on this fact

So keep reading my detailed Allocate Smartly review to learn more.

My Allocate Smartly Portfolio Review

To give you an idea of what can be accomplished at Allocate Smartly, below is back tested data over 30 years for the strategy I created and implement in my own portfolio using Allocate Smartly’s platform. 

As you can see, this portfolio has done the seemingly impossible: beat the benchmark, or achieved “alpha”.

It wasn’t me though – I just capitalized on the brilliance of others who developed the strategies on Allocate Smartly.

I did this by creating my own portfolio after analyzing and combining 3 of the strategies at Allocate Smartly that I liked the most. Then I assigned the best three trading days, based on performance, to update or “trade” my portfolio for each of those strategies.

Don’t be intimidated by “trading days” or combing strategies. You don’t have to do all this; even many of the single strategies have beaten a benchmark portfolio over 50 years of back testing, as explained more ahead. 

Now back to the past results of my portfolio so you can draw your own conclusions about Allocate Smartly after seeing the following data noted with red arrows above. 

(I encourage all investors to research and draw their own conclusions vs taking anyone’s word for something as important as investing!)

• Annualized returns – 14.1% my strategy vs. 8.1% for the benchmark
• The maximum drawdown that has occurred – -12.6% for my strategy vs. -29.5% for the benchmark
• How long the drawdown lasted – 17 months for my strategy vs 40 months for the benchmark

In other words, the portfolio I created (and put my money into) using Allocate Smartly had:

• A 6% better annualized return (that’s every year)
• With a drawdown that was 57% better and 58% shorter than a 60/40 stock bond portfolio…

…based on backtested results. 

The past return this strategy has achieved is higher than my minimum acceptable return and the risk is well within my acceptable risk level. (I suggest everyone have a minimum return they’re willing to accept when investing.)

Note that the referenced benchmark portfolio is a fixed 60-40 stock (SPY) and bond (IEF) portfolio. This is a logical benchmark for comparison, although, in recent years investors have admittedly leaned toward a heavier allocation to stocks than 60% and less than 40% in bonds.

Based on backtested results and my success investing with Allocate Smartly thus far, I find it a highly valuable resource. Therefore, I’m delighted to write this Allocate Smartly review for my readers.

-Please note that I became an affiliate for Allocate Smartly after using it for a while. I very rarely accept affiliate offers because I don’t see many products I can honestly recommend. Being an affiliate means I get a small payment if you buy Allocate Smartly from my affiliate link here. It will not cost you more if you use my link, and you will get access to the free training I am creating for those who buy from my affiliate link by sending me an email with the email you used when you bought Allocate Smartly.

Who Should Use Allocate Smartly?

Allocate Smartly is ideal for proactive investors who:

• Don’t necessarily want to “ride out” the painful declines during bear markets and recessions
• See their current investment strategy isn’t going to be enough for them to reach their financial goals
• Are concerned about making 4% retirement withdrawals from their savings
• Don’t like holding “defensive” assets like bonds and gold during the years they pull down returns
• Want to manage risk better
• Individual investors that want to easily invest in a professionally developed model for a fraction of the cost of a wealth manager
• Or financial advisors who want to invest their client’s money with a strategy that has beaten the benchmark with less risk over the past 50 years

Allocate Smartly’s Strategy Overview Page

This may sound complicated but Allocate Smartly is very user friendly.

To give you an idea, below is an image of how my account dashboard looks in Allocate Smartly showing different strategies I use in 3 different accounts. I track and adjust the portfolio amounts here each time the portfolio rotates from one asset to another or adjusts the percentages as explained in more detail ahead.

 

 

What Is the Benefit of Allocate Smartly?

The benefit of Allocate Smartly is that it allows investors and financial advisors to use historical data to evaluate and compare over 60 active investment strategies and then invest their chosen strategies in their own brokerage accounts.

The end result: This data analysis helps investors evaluate, choose and invest portfolio models that align with the returns needed to achieve their financial goals within acceptable risk levels based on historical data.

And that’s a very big deal.

You can replicate the exact strategy you choose using Allocate Smartly’s platform to make investing that same strategy in your brokerage account easy.

You can even use Allocate Smartly’s software to combine several strategies you like, as I did with the strategy above, or you can keep it simple and use just one strategy.

I already know what you’re thinking; past performance is only that – past performance!

I would think the same thing so let’s see how Allocate Smartly’s platform helps lessen this challenging reality for investors.

Allocate Smartly’s Long Term Data

Most of us investors have learned the hard way the problem of relying on past performance data to choose investments: Past performance doesn’t necessarily repeat, at least not during the time frame we’re invested, making it hard to plan around past performance data.

Most past performance data is way too short, as addressed in more detail later in this post.

Allocate Smartly’s past performance data, however, goes back a minimum of 20 years and it often goes back over 50 years. Call me a nerd, but I love this!

This long term data is a huge plus and here’s why.

If I’ve learned anything about investing, it’s that economic factors heavily influence investment returns, as I teach in my investing course.

And economic factors change based on long term trends.

We simply can’t assume what happened over the past few years will continue to happen during the years we’re invested. 

Allocate Smartly’s reliable multi decade backtesting data allows investors to see how a model would have performed during different economic conditions, such as recessions, high or low interest rates, bull markets, and bear markets.

This long term data cushions the reality that past performance is not a guarantee of future performance.

For example, I was able to see how the strategies I liked performed in 1980 when interest rates were over 20%! I also was able to see how these same strategies performed when interest rates subsequently fell.

When choosing one of the strategies at Allocate Smartly, I assess what’s happening now, and what’s likely to occur economically as a result of our current situation. Then I can choose a strategy that has performed well during such economic conditions in the past. 

I find this to be the biggest advantage of Allocate Smartly because the long term data allows us to do so much that investors have never previously been able to do in terms of selecting investment strategies that have a higher probability of producing the investment returns needed to achieve financial goals within acceptable risk and in the desired time frame.

And this is a game changer.

Such information was previously unavailable to individual investors, and now it’s available at Allocate Smartly for a reasonable monthly or annual fee.

Where Did the Allocate Smartly Strategies Come From?

The strategies found at Allocate Smartly were developed by leading experts, many of whom have done this for decades. Meb Faber, Ned Davis, Dr. Wouter Keller, and Gary Antonacci of Dual Momentum fame are among the system developers, along with their teams of quantitative analysts.

Allocate Smartly does thier own screening and testing of the strategies before they make the cut to be included on the website. Most of the strategies rotate based on trends vs being fixed asset allocation models. These more advanced rotating strategies are often called tactical asset allocation models.

What Kind of Investing Models Are on Allocate Smartly?

Allocate Smartly has data on ETF (Exchange Traded Funds) investing strategies that can suit beginner to advanced investors.

Let’s look at some of the simpler strategies first.

Allocate Smartly’s Fixed Asset Allocation Strategies

The simplest strategies on Allocate Smartly include buy and hold portfolios with fixed asset allocations into stocks and defensive investments, such as bonds and gold.

If you want to invest in a fixed asset allocation strategy, you probably don’t need Allocate Smartly.

But do you really want to use a fixed asset allocation investing strategy? 

Let’s look at these fixed strategies and see why you may want to focus on the more advanced strategies at Allocate Smartly that don’t use a fixed asset allocation.

Examples of Fixed Asset Allocation Strategies on Allocate Smartly

Two very popular examples of the buy and hold strategies include Ray Dalio’s All Weather Portfolio and Meb Faber’s Ivy Portfolio.

I was somewhat surprised to find these simple buy and hold strategies in the mix at Allocate Smartly given the more advanced nature of the other strategies represented. These strategies are excellent to use for performance and risk comparisons, however, since many investors are already familiar with them.

Pros of the Allocate Smartly Fixed Asset Allocation Strategies

The All Weather Portfolio and The Ivy Portfolio, however, do at least have allocations into defensive investments besides bonds, unlike most suggested asset allocation models; they each hold commodities, too. The Ivy Portfolio also holds real estate.

Adding asset classes besides stocks and bonds can sure help portfolio performance while reducing risk at times.

The fixed asset allocation models are simple to manage. They are also very tax efficient, as addressed more later in this post.

Cons of the Allocate Smartly Fixed Asset Allocation Models

One problem, however, is that simple buy and hold investment strategies like these lag during bull markets when the heavy bond and commodity allocations weigh down performance.

Another problem is that bond prices fall when interest rates rise making bonds not work to mitigate portfolio risk at times, as we saw in 2022 and many other years prior to the 1990’s when stocks and bonds were correlated.

In other words, sometimes it’s great to hold defensive assets and sometimes they are a real drain on returns, making it undesirable to own them all the time. 

Like most fixed, “strategic” asset allocation models, both of these popular portfolios hold a fairly large percent in bonds as a defense against bear markets. 

These strategies may hold some allure for investors opposed to more active portfolio management, but for the reasons above they have their own problems as you can see.

For these reasons, you’re probably going to want to look at the more advanced investment strategies at Allocate Smartly vs the simplest buy and hold portfolios.

Allocate Smartly’s Advanced Investment Strategies

The real gold at Allocate Smartly is in the ability to analyze strategies that are alternatives to buy and hold investing models like The Ivy or All Weather Portfolios. These more advanced investment strategies seek to successfully rotate in and out of asset classes based on price movement rather than adhering to a fixed asset allocation.

In other words, these strategies seek to own the best performing asset or assets only for any given time frame.

The pursuit of this seemingly impossible accomplishment was lost in the glamour of easy passive buy and hold portfolios over the past two decades along with the prevailing belief it’s impossible to beat buy and hold investing. 

The data at Allocate Smartly proves this simply isn’t true. 

Why Use Advanced Investment Strategies?

Alternatives to buy and hold strategies are often suggested as being riskier. We can also see from the Allocate Smartly data many of the rotating strategies have less risk than a benchmark buy and hold index portfolio with better and shorter drawdowns.

Earlier in this post you saw the back tested performance details for the strategy I assembled on Allocate Smartly; it had considerably less risk with a much better return than a typical portfolio with a 60-40 stock and bond fixed asset allocation.

The reality is fixed buy and hold portfolios are subject to all kinds of risk, including bear market risk, interest rate risk, inflation risk, and more.

So there are several reasons to look at the more advanced investing strategies on Allocate Smartly that rotate vs a fixed buy and hold strategy that’s grown so popular with investors.

And this is what makes Allocate Smartly so special.

Allocate Smartly has 65 strategies and counting, most of which are designed to rotate out of asset classes expected to fall and rotate into asset classes expected to rise based on relatively long term trends rather than buying and holding the same assets through the ups and downs.

How Tactical Asset Allocation Is Developed

You might be thinking: How can the seemingly impossible feat of beating a buy and hold portfolio be accomplished if most financial advisors and fund managers cannot accomplish it?

The answer can be partially explained by the very simple explanation below of how tactical asset allocation strategies are created.

1. The portfolio’s movements are based on slow moving trends revealed from technical analysis.
2. Technical analysis is used on past price movements to better anticipate future price movements.
3. A strategy is created from the conclusions obtained from that technical analysis.
4. Then that strategy is back tested repeatedly, making it better and better.

You see, technical strategies that use ETFs can be back tested relatively easily whereas someone subjectively choosing stocks or ETFs cannot. Back testing then allows developers to improve their strategies, and then retest until satisfactory results are acheived.

Hedge Fund Like Results

You’re still probably thinking: But, but, but….isn’t it impossible to beat a passive portfolio? This is what we’ve all been taught for years.

I knew from analyzing and investing in a couple of hedge funds many years ago that outperforming a fixed asset allocation model could work because I had seen this previously in my analysis then.

I just didn’t like investing in hedge funds due to the huge minimums and large fees. I also didn’t want to endure the large swings in performance the hedge funds that I evaluated experienced.

I didn’t have access to this type of backtesting data needed to compare trend following strategies until I learned of Allocate Smartly from Todd Tressider. Note that Todd previously developed a hedge fund strategy and is one of the top strategy contributors at Allocate Smartly.

The minute I saw Allocate Smartly I knew it was what I had been searching for over the past 20 years so I dove in head first.

But there’s no need to take my or anyone else’s word for the value of Allocate Smartly.

The proof is in the pudding as the saying goes, or in this case, the data available from backtesting that allows you to see which strategies performed best, and when.

You can handily see and compare the performance of buy and hold strategies with strategies that are traded several times a month, year or every few years and see the tactical strategies, or those that rotate, perform better. Allocate Smartly’s software makes this comparison easy to accomplish.

ETF Backtesting of Tactical Investing Strategies

Advanced investors know past performance data prior to a strategy’s existence is only as good as the backtesting that’s done to produce the data.

So, at this point, you’re probably wondering how Allocate Smartly can provide multi decade data, or why they do so in the first place, since most investment data that’s presented to investors only goes back five or ten years. In other words, investors are acustomed to looking at shorter term data, so most investors see no reason to dig 50 years into the past just to choose an investing strategy.

One reason for presenting only 5 or 10 year past performance data is the time frame that makes the product (fund, manager, advisor, strategy, etc.) look best is what’s presented. There is no reason for such bias in the Allocate Smartly data, however. All the strategies are presented so Allocate Smartly customers can choose the strategies they like vs one strategy being promoted over others.

Second, Allocate Smartly uses ETF backtesting when possible. But since most ETFs weren’t in existence until the 1993’s and beyond, they use alternative sources, such as the index that underlies the ETF. Allocate Smartly believes this data is reliable and I tend to agree. One reason for this reliability is that the asset class trends in the strategies at Allocate Smartly are slow moving trends vs very short term day trading movements.

What ETFs Do the Allocate Smartly Strategies Use?

The strategies at Allocate Smartly vary in the ETFs they buy and sell.

Some rotate into stocks and bonds only while others rotate into many asset classes, including commodities, US and international real estate, international stocks and bonds, cash, emerging markets, and more.

Allocate Smartly’s own Meta strategy can rotate into any asset class from among their strategy universe.

An important part of the strategy selection at Allocate Smartly is selecting a strategy that moves into the asset classes you know you want to own.

For example, I know I want to be able to rotate into cash or very short term debt when warranted. Therefore, I chose one to two strategies that rotates into cash.

It can be hard to understand how the various asset classes can improve results while lowering risk, so I help my financial coaching clients that use Allocate Smartly understand this better in order to choose strategies that use the assets they want to own.

Other Benefits of Allocate Smartly

Access to past performance data for all these strategies certainly isn’t the only benefit of using Allocate Smartly. Below are a few more benefits of Allocate Smartly.

1. Retirement Planning Data

There is data that helps plan for safe retirement withdrawals based on probable investment returns for all the strategies. You can choose the length of expected time in retirement from 20 to 40 years, as well as the inflation rate when evaluating strategies for retirement withdrawals.

The predicted safe retirement withdrawal rate is shown as well as the perpetual withdrawal rate. Of course these are based on assumptions that the strategies will continue to perform as they have in the past. I add my own little margin of safety here for a little less than the expected safe withdrawal rate in the Allocate Smartly data.

Some of the strategies in Allocate Smartly are expected to provide safe retirement withdrawals of over 7%, which is unheard of. This is as opposed to the popular but questionable 4% withdrawal from retirement savings based on a buy and hold portfolio.

Allocate Smartly’s Retirement Withdrawal Rate Table

Source: Allocate Smartly

2. Tax Planning

In addition to retirement planning data, there is taxation data that’s helpful. Buying and selling ETFs trigger capital gains which are often short term and thus taxed the same as earned income at a higher rate than dividends or long term capital gains.

Higher short term capital gains tax rates are probably the biggest disadvantage of not following a long term buy and hold investment strategy.  Fortunately, Allocate Smartly provides detailed tax data to help investors know whether it’s best to use a given strategy in a tax favored retirement account or a regular account.

3. Investing an Allocate Smartly Strategy

The Allocate Smartly platform is designed to help you implement the portfolios you choose, also.

For example, you can enter the total amount in your portfolio in your member dashboard as shown previously. Allocate Smartly will then show you the allocations to make into each ETF with both dollar amount and number of shares. I download this data from the dashboard. Next, I add it to a download from my broker, enter a simple formula, and place the trades.

Then Allocate Smartly will let you know when your chosen strategy rotates again by sending you an email if you want.

In your dashboard, you can establish up to 3 portfolios under one account. Each portfolio can trade a different strategy, or the same strategy. This allows you to have multiple retirement accounts, taxable accounts, or a combination of account types, as I do.

Then Allocate Smartly will show you how and when to buy or sell ETF’s in each account based on the strategy and trading day you set up for that account.

4. The Allocate Smartly Blog

The Allocate Smartly blog is packed with useful information for investors looking to use a tactical investing strategy.  The blog is available for free.

5. Allocate Smartly’s Strategy Correlation Cluster

If you’ve been investing for a long time, you may have several investments or funds that all move in the same direction at the same time. In other words, all your investments are correlated.

The reality is that it can be hard to have investment portfolios that aren’t correlated because most asset classes are correlated. Allocate Smartly Allocate Smartly’s correlation cluster table can help with that. It allows investors to see how closely correlated various strategies are so risk can be better managed through diversification.

I will acknowledge, however, that I would like for the 3 strategies I chose to be a little less correlated on Allocate Smartly’s correlation cluster table. I did, however, choose strategies that were diversified deeper into the data. Without getting too far into the weeds and making this sound overly complex, this diversification was related to risk, holdings, and returns during various events in the financial markets and the economy.

Source: Allocate Smartly

The Disadvantages of Allocate Smartly

As you can see, there are many advantages to using Allocate Smartly.

I don’t feel my review of Allocate Smartly is complete without at least a few cons but I honestly cannot think of any.

Sure, there are some cons to tactical investing vs hold and hold investing.

Taxes are one, but this can be worked around by investing the chosen Allocate Smartly strategy in a tax advantaged retirement account.

And there have been a few financial experts that have questioned the safety of the ETF structure. The workaround with this would be to use index mutual funds instead of ETFs, although the investing implementation would be delayed at least one day.

These aren’t really Allocate Smartly cons, however. These are cons related to trend investing vs buy and hold investing.

Some might consider the annual cost of Allocate Smartly a con but given that it is so reasonable when compared to what you get, and in comparison to paying a financial advisor, I honestly think the expense is more of a pro than a con so I’ve indicated it as such on the table.

Allocate Smartly Review Summary

Allocate Smartly is a groundbreaking platform that gives individual investors the tools to analyze and implement strategies developed by some of the best developers of investment strategies in the world. 

The amount of information previously only available to accredited investors and financial institutions, and the ease with which you can implement sophisticated strategies makes Allocate Smartly worth the fee for someone who is looking for an alternative to buy and hold investing.

I’m unsure why everyone isn’t using it but I can only guess they either don’t know about it or misunderstand the benefits of using an alternative to a buy and hold investing strategy.

As previously addressed, Allocate Smartly is one of the handful of companies I am happy to be an affiliate for. Note that I donate a portion of affiliate income to The Settlement Home for troubled youth in Austin.

When you buy through my affiliate link you’ll also get access to my Allocate Smartly training; just email me the email you used when you purchased Allocate Smartly.

If you want some more help, after I mastered the software and implementation of my own Allocate Smartly strategies, I created processes for this which I use and teach to financial coaching clients.

Allocate Smartly PROS	Allocate Smartly CONS
Long Term Performance Data	None
Long Term Risk Assessment Data
Long Term Monthly Performance Data
Strategy Tax Data
Strategy Correlation Data
Strategy Comparison Tools
Retirement Withdrawal Data
Strategies for Investing Commission Free
Strategies for Beginner to Advanced Investors
Reasonable Cost for Allocate Smartly Tools
Strategy Change Notifications Via Email
Account Tracking Dashboard