American Funds Tactical Asset Allocation Strategy
Incepted in October 1998, this strategy follows a asset allocation methodology which evaluates the market for a “risk on” or “risk off” environment based on equity and bond market timing models. It also uses the Long Term System used by EVO and in our basic S&P 500 strategy to recognize regime change in the market.
When the environment is favorable, equity and bond fund asset classes are evaluated for the best relative strength. Usually, between one and three funds are selected, and the funds are rotated as relative strength changes. The strategy can be invested 100% in cash at times.
Strategy Highlights:
21 year track record
53% greater annualized rate of return than the S&P 500 total return through January 31, 2019.
Lower draw downs than the S&P 500 total return
NET RETURNS: for individual investors
GROSS RETURNS: for investment professionals
Calendar Year Returns
October 5, 1998 - December 31, 2020
Performance is devoid of load fees and precision dated time weighted for cash flows and reinvestment of distributions.
| Year | AFS Gross | AFS Net | S&P 500TR |
|---|---|---|---|
| 2020 | 17.6% | 16.1% | 18.4% | 2019 | 26.2% | 24.6% | 31.5% |
| 2018 | 1.4% | 0.9% | -4.4% | 2017 | 20.9% | 19.3% | 21.8% |
| 2016 | 12% | 10.5% | 12% |
| 2015 | -0.3% | -1.6% | 1.4% |
| 2014 | 4% | 2.7% | 13.7% |
| 2013 | 28.2% | 26.6% | 32.4% |
| 2012 | 14.2% | 12.7% | 16% |
| 2011 | -1.5% | -2.7% | 2.1% |
| 2010 | 14% | 12.5% | 15% |
| 2009 | 27% | 25.3% | 26.5% |
| 2008 | -35.8% | -36.6 | -37% |
| 2007 | 20.4 | 18.9% | 5.5% |
| 2006 | 8.1% | 6.7% | 15.8% |
| 2005 | 17% | 15.5% | 4.9% |
| 2004 | 17.9% | 16.3% | 10.9% |
| 2003 | 30.2% | 28.5% | 28.7% |
| 2002 | -10.3% | -11.5% | -22.1% |
| 2001 | -4.8% | -6% | -11.9% |
| 2000 | 6.4% | 5% | -9.1% |
| 1999 | 43.8% | 43.9% | 21% |
| 1998* | 27.9% | 27.4% | 24.8% |
Potomac Advisors American Funds Tactical Asset Allocation Strategy Disclosure
The American Funds Asset Allocation Strategy performance is based on an actual representative account (the Model Account) from inception on October 5, 1998. The strategy uses a market timing model to determine favorable times to invest in equity or bonds using the American Funds family of funds. When the investment environment is deemed favorable, usually several funds are selected based on relative strength, risk adjusted returns, chart patterns and/or fundamental analysis. Funds are rotated as relative strength changes. The strategy can be invested 100% in cash at times. Performance is devoid of load fees and is precision-dated, time-weighted for cash flows and reinvestment of distributions. Returns are net of the underlying mutual fund management fees, custodial fees and other fund (administrative) expenses.
The performance results shown here reflect the use of the American family of funds traded directly at the fund. Results were adjusted to remove the effect of load fees, which were charged in the model account, since the share class used for purchase, the “A” shares, were purchased through a commissioned broker, and carried a variable load. The same funds, without any load, can now be purchased at various custodians using the no-load F1 share class. While F1 no-load shares may be purchased at other custodians, they may result in higher or lower internal fund management fees than at the American Funds. In addition, when traded at other custodians, there may be transaction fees, platform, and/or custodial fees not charged at the American Funds. Results shown here include simulated management fees charged by Potomac Advisors of 1.3% annually, the maximum fee charged by Potomac Advisors for this strategy, prorated quarterly and billed in advance. Fees charged by other investment advisors for this strategy may be higher or lower than the fees charged by Potomac Advisors and may be calculated in a different manner, thereby resulting in different performance than shown here. No adjustments have been made for potential income tax consequences. Performance for other investment programs may differ materially (more or less) from the performance shown here. It should not be assumed that future recommendations will be profitable or equal past performance. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted.
The benchmark returns of the S&P 500 are total returns and reflect the reinvestment of dividends. The S&P 500 Index is a capital weighted index composed of 500 widely held common stocks varying in composition and is not available for direct investment. Benchmark returns are provided exclusively for comparison purposes only so as to provide general comparative information to assist an individual client or prospective client in determining whether the performance of the American Funds strategy meets, or continues to meet, his/her investment objective(s).
It should not be assumed that any of the programs will correspond directly to any such comparative index. The volatility of the market indices may materially differ (more or less) from that of the actual portfolios. Since individuals cannot invest directly into any index, deductions for management fees or other custodial or transaction charges are not taken into account. These charges, if applicable, would reduce the overall return of the S&P 500 index. The strategies shown here involve investing in mutual funds. Mutual fund shares are not insured by the FDIC or any other agency, are not guaranteed by any financial institution, are not obligations of any financial institution, and involve investment risk, including possible loss of principal.
The data presented has been collected from the client mutual fund periodic statements and are believed to be reliable. However, Potomac Advisors does not guarantee nor warrant the accuracy, timeliness, or completeness of the information. Past performance is no guarantee of future results. This material is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any security. Such offers can only be made where lawful under applicable law.
Potomac Advisors is registered as an investment adviser with the SEC. Such registration does not imply a certain skill or training and no inference to the contrary should be made. Information pertaining to Potomac Advisor’s advisory operations, services, and fees is set forth in their current Form ADV Part II, a copy of which is available from Potomac Advisors upon request. Information pertaining to any mutual fund that is used in the EVO 1 strategy is set forth in each respective mutual fund’s prospectus, a copy of which is also available from Potomac Advisors upon request.
