Our Journal of Financial Planning Study, Translated into English

Readers who visit the Pinnacle Advisory Group website (pagmain.wpengine.com) will note that a paper by Solow, Kitces, and Locatelli, entitled “Improving Risk Adjusted Returns Using Market-Valuation-Based Tactical Asset Allocation Strategies,” was published in the December issue of the Journal of Financial Planning (JFP) – the most distinguished journal in the profession. The paper itself is a technical study that may be difficult to read, so this summary is intended for those who might not care to wade through the academic and statistical details. The basic conclusion of the paper was this: By reducing exposure to stocks when their prices are excessive relative to the profits they produce and increasing exposure to stocks when prices are low relative to their earnings, it is possible to systematically improve long-term returns.