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Mark Biller

Mark Biller

Executive Editor

Mark joined SMI in 2000. He leads SMI’s overall content strategy, managing the editorial direction and writing many articles. He led the company’s efforts to create its first web site, helped develop several of SMI’s investment strategies, and has been a contributing author to the Sound Mind Investing Handbook. 

In addition, Mark helped design and launch the three Sound Mind Investing mutual funds. He has served as the Senior Portfolio Manager since the original SMI Fund was launched in 2005.

Prior to joining SMI, Mark worked at Tax and Accounting Software Corporation. 

Mark received an undergraduate degree in Finance from Oral Roberts University.   

Mark and his wife, Cindy, have three children at home.

Most Recent Articles

Upcoming Changes to the SMI Funds

The SMI Funds, advised by SMI Advisory Services, are a separate business from the SMI newsletter. However, given the significant interest in the SMI Funds among newsletter readers, we thought it would be helpful for the newsletter to forward the following information from the SMI Funds regarding changes in the pipeline for a few of those funds.

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DAA – January 2018 Update

There are no changes to the DAA lineup for January. Read on for the full details.

DAA is a core portfolio strategy that is designed to help SMI readers share in some of a bull market’s gains while minimizing (or even preventing) losses during bear markets. The strategy involves using exchange-traded funds to rotate among six asset classes, holding three at any one time. DAA is a defensive strategy that nonetheless has generated impressive back-tested results, demonstrating the power of “winning by not losing.”

The recommended categories/ETFs for January are (in order of current momentum):

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Sector Rotation – January 2018 Update

There is no change being made to the official SR recommendation for January. Read on for the details.

Sector Rotation is a high-risk/high-volatility strategy. While its peaks and valleys have been more extreme than SMI's other strategies, it has generated especially impressive long-term returns, as discussed in Sector Rotation is Risky, But Highly Rewarding.

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SMI’s Fund Upgrading Strategy Evolves: Introducing Upgrading 2.0

The lack of true downside protection has long been a concern for those using SMI’s Fund Upgrading strategy. Fortunately, recent developments in the study of momentum have laid the foundation for a new defensive protocol that provides a “safety net” for Upgrading.
This new 2.0 protocol gives us confidence that Upgrading will be up to the task of defending member portfolios during the next bear market.

SMI’s Fund Upgrading strategy, which uses a concept known as “performance momentum” to make investment recommendations, has been part of the SMI newsletter in some form or fashion from its earliest days in 1990. By the late 1990s, Upgrading had settled into roughly the form used today. In the years since, the only significant change to Upgrading, at least on the stock-fund side, has been the switch from recommending four funds in each risk category to only three (in April 2015).

In the meantime, academic and industry research on the momentum principles on which Upgrading is based has been anything but idle. In fact, momentum has been one of the most heavily researched investing topics for several decades now. This is largely due to its status as “the premier market anomaly.” Momentum is an easily observable exception to the conventional wisdom that stock market prices are set by such an efficient process that it’s difficult — if not impossible — for investors to outperform the market over time.

That “premier anomaly” label was attached by none other than Eugene Fama, who won a Nobel prize for his work on the Efficient Market Hypothesis. As the name implies, his life’s work has been explaining why factors such as momentum shouldn’t work. Yet just this past year, Fama conceded, “Momentum is a big embarrassment for market efficiency.”

Because momentum has been such a persistent thumb in the eye of the indexing/efficient markets community, researchers have undertaken many studies of momentum. Actually, the earliest such research dates back nearly a century, but up until about a decade ago, most of the research focused on variations of relative momentum — i.e., how an investment has performed relative to others. This relative-momentum analysis is the type SMI has always used in SMI’s Upgrading strategy, and is reflected in our monthly Fund Performance Rankings report.

While the research studies on relative momentum affirmed its robustness and effectiveness, it wasn’t until somewhat recently that a new momentum idea emerged. This was the study of how an investment performed, not against other investments, but against its own past. This second type of momentum is referred to as absolute momentum. Relative momentum asks the question: “In recent months, how has this investment performed compared to others?” But this newer momentum measure asks the question: “In recent months, how has the investment performed in an absolute sense, looking at its own history, ignoring what others have done?”

Multiple studies have confirmed that asking this question can lead to profitable investing choices going forward, but credit for popularizing absolute momentum belongs to Gary Antonacci, who detailed it extensively in his award-winning book, Dual Momentum Investing. In addition to compiling the results of all the research done on absolute momentum, much of it his own, Antonacci also took the crucial step of marrying the two forms of momentum — relative and absolute — into a simple investment strategy that readers of his book could apply easily. The backtested results of this approach were surprisingly good, despite the approach being extremely simple.

In a nutshell, while Antonacci demonstrated what SMI Upgraders have long known, that relative momentum can be a powerful return enhancer, he added a critical new dimension as well: showing how applying absolute momentum criteria could limit downside loss significantly.

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No Changes to Stock or Bond Upgrading for January

There are no changes to Stock or Bond Upgrading this month.

However, there is a very significant change being made to the Upgrading strategy this month. Be sure to read SMI’s Fund Upgrading Strategy Evolves: Introducing Upgrading 2.0 to learn about this exciting new development!

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SMI’s 2018 Rebalancing Guide

As we discuss how to rebalance to your ideal portfolio allocation for 2018, remember that the most important characteristic of your portfolio — the factor that influences the performance of your portfolio more than any other — is the way you divide your money between asset classes.

An “asset class” is a broad category of investments that tend to have similar risk characteristics and respond similarly to market forces. The most common classes are stocks, bonds, real estate, commodities, and cash equivalents.

SMI’s core strategies approach this asset allocation task quite differently. Dynamic Asset Allocation (DAA) doesn’t require you to choose an allocation, as the strategy shifts the portfolio allocation automatically based on market conditions. (More on DAA in a moment.)

In contrast, the starting point for our two Basic Strategies — Just-the-Basics (JtB) and Fund Upgrading — is to determine how much of your portfolio should be allocated to investments in which you are an owner (stocks) and those where you are a lender (bonds). The more you invest in stocks, the greater the growth potential but also the greater risk.

In determining your stock/bond percentages, it’s important to consider your personal goals and risk tolerance. We’ve provided step-by-step instructions to lead you through this process in the “Start Here” section. At the end of that process, you’ll have stock- and bond-allocation percentages based on your investment “time frame” — that is, how long before you will need to begin withdrawing your money for living expenses.

If you are following Just-the-Basics or Upgrading, you should make any stock/bond allocation changes only in accordance with your long-term plan, and only as a thoughtful response to changes in your circumstances (perhaps your age now puts you in a different “season of life” category) or significant changes in your financial goals or fortunes. Target allocations should not be altered emotionally due to recent activity in the markets. That said, this month’s introduction of a new “safety net” within SMI’s Upgrading strategy (see this month’s cover article) may be significant enough to warrant a review of your overall portfolio allocations.

Note that even without intentional changes in your asset allocation, a well-diversified portfolio is going to gradually stray from its initial allocations as some investments perform better than others over the course of a year. It’s necessary, then, to periodically “rebalance” the portfolio, bringing it back to its target allocations by selling some of the winners and adding money to the laggards.

If you’re a Just-the-Basics investor, rebalance for 2018 simply by adjusting your current holdings to match your desired stocks vs. bonds percentage allocations. (For a step-by-step primer on rebalancing, see Is Your Portfolio Out of Balance? The Just-the-Basics portfolio mix is permanently fixed.)

Simplifying the Upgrading process

If you’re Upgrading, you have an additional step to take. After reaching your overarching stock/bond allocation decision, you have decisions to make about your percentage across the various stock- and bond-risk categories.

In recent years, we’ve been allocating evenly across the stock-risk categories (see table). While we may deviate from this occasionally in the future in response to what we perceive to be unusual opportunities or risks, we expect those instances to be the exception rather than the rule.

This year the rebalancing task for Upgraders is simply to bring their portfolio allocations back to the same starting percentages as last year.

Bonds will continue to be allocated as they have in recent years: Whatever an investor’s overall bond allocation is, half of that is invested in the rotating Upgrading selection (updated monthly at the bottom of the Fund Upgrading Recommendations page), while the other half is divided evenly between short-term and intermediate-term bonds. For example, a person with a 40% total bond allocation would invest 20% in the rotating Bond Upgrading selection, and 10% in each of the Vanguard short-term/intermediate-term index funds (or ETFs).

(Click Table to Enlarge)

Precision not required

Recent research has tended to indicate annual rebalancing isn’t as necessary or helpful as was once believed. SMI still thinks the process is worthwhile, but this body of research has made us less dogmatic about the level of precision it requires. As long as a person is within a few percentage points of his or her long-term allocation targets, that’s probably close enough (especially if there are costs involved in making further trades to get closer to the target allocations).

Rebalancing in DAA

Those with premium memberships also have access to our Dynamic Asset Allocation and Sector Rotation strategies. As we noted earlier, DAA tells you how to allocate as you go.

If you’re following the DAA strategy, you begin by investing one-third of your DAA portfolio in each of three asset classes (represented by three recommended ETFs). Over time, as positions are sold and the proceeds reinvested in different ETFs, your portfolio will lose that equal balance. Your primary rebalancing task is to periodically restore equality to the three positions. But this doesn’t have to happen at the beginning of the year — an imbalance between the three holdings can be addressed any time a holding is being replaced. So feel free to either rebalance your DAA holdings now, or wait until a month when you’ll be making DAA trades anyway.

For those members who are diversifying between strategies, an additional rebalancing task is necessary. For example, someone dividing their investments evenly between DAA and Fund Upgrading may need to rebalance slightly so the same amount is invested in each as we begin 2018. (See A Few More Thoughts On Rebalancing for more on rebalancing a DAA portfolio.)

Wrapping up

We recognize that understanding and applying SMI’s investment strategies has become more complicated over time as we’ve added more options. Many members used to invest their entire portfolio in Upgrading. Now, some have chosen, despite the need for a little added number-crunching, to split their investments between Upgrading and DAA, with many including Sector Rotation as well.

Given this added complexity, we’ve looked for ways to simplify other aspects of maintaining an SMI portfolio. Keeping our Upgrading category allocations consistent from year to year is an example of this effort. While it may not be obvious, so is this month’s cover article topic of bringing potential bear market protection into the Upgrading strategy itself (as opposed to our old Bear Alert guidelines, which were external to the strategy), so all a member has to do is follow the normal Upgrading buy/sell instructions on the Fund Upgrading Recommendations page. It’s our goal to keep things as simple as possible for SMI members, and to that end we’ll continue to look for ways to gain simplicity without sacrificing performance.

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6 Steps to Creating a Long-Term Investing Plan

In light of James 4:13-14, some Christians feel uneasy about engaging in long-term financial planning: “Come now, you who say, ‘Today or tomorrow we will go to such and such a city, and spend a year there and engage in business and make a profit.’ Yet you do not know what your life will be like tomorrow. You are just a vapor that appears for a little while and then vanishes away.”

Obviously, these verses teach that we shouldn’t have an arrogant or overly self-reliant attitude toward planning and provision. Still, Scripture provides ample support for the idea that we should take responsible steps to plan for our financial future. (See, for example, Genesis 2:15, Proverbs 6:6-8, and Luke 16:11.)

As is often the case, a mature Scriptural approach involves a balance. Too little attention to planning can lead to not having enough money to live on in our later years, or to taking too much investment risk later in life in an attempt to make up for lost time. But too much of a focus on long-term wealth goals can lead to a neglect of immediate priorities, such as giving.

We believe being a faithful steward involves (1) managing the resources you have as effectively as possible while (2) trusting God for the outcome. A wise management step to take here at the beginning of a new year is to create a written long-term financial plan. Without a written plan, your ongoing financial decisions likely will be driven by the emotions of the moment — hardly a formula for long-term success.

Here are six key elements that should inform your written plan.

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An Upgrading Overview: Easy as 1-2-3

Why Upgrade?

SMI offers two primary investing strategies for “basic” members. They are different in philosophy, the amount of attention they require, and the rate of return expected from each. Our preferred investing strategy is called Fund Upgrading, and is based on the idea that if you are willing to regularly monitor your mutual-fund holdings and replace laggards periodically, you can improve your returns. While Upgrading is relatively low-maintenance, it does require you to check your fund holdings each month and replace funds occasionally. If you don’t wish to do this yourself, a professionally-managed version of Upgrading is available.

SMI also offers an investing strategy based on index funds called Just-the-Basics (JtB). JtB requires attention only once per year. The returns expected from JtB are lower over time than what we expect (and have received) from Upgrading. JtB makes the most sense for those in 401(k) plans that lack a sufficient number of quality fund options to make successful Upgrading within the plan possible. Here are the funds and percentage allocations we recommend for our Just-the-Basics indexing strategy.

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Annual Seasonality Buy Signal Triggered – Fall 2017

This post has the potential to be confusing, especially for newer readers. So let me begin by saying that if you don't know what the term "annual seasonality" means, you can safely ignore everything written here.

For those of you who do know about annual seasonality and have been watching for the fall signal to buy, it has been triggered.

I’m going to repeat some background about annual seasonality, then turn to the specifics of this particular signal. (If annual seasonality and MACD are old-hat to you, skip down to the “Recent Developments” heading below.)

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DAA — December 2017 Update

There are no changes to the DAA lineup for December. Read on for the full details.

DAA is a core portfolio strategy that is designed to help SMI readers share in some of a bull market’s gains while minimizing (or even preventing) losses during bear markets. The strategy involves using exchange-traded funds to rotate among six asset classes, holding three at any one time. DAA is a defensive strategy that nonetheless has generated impressive back-tested results, demonstrating the power of “winning by not losing.”

The recommended categories/ETFs for December remain (in order of current momentum):

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