This is our first public update of the the Globally Optimized™ Capital Markets Index™ (GOCMX) since we introduced it last month.

As you know, the index measures the blended performance of stocks, bonds, commodities, real estate, and currencies on a global basis. Stracia determines the relative allocations among these categories by finding that blend which represents the highest reward-to-risk ratio at each point in time. Thus, the index is not merely a “dumb blend,” snapshot, or some advisor’s opinion or best guess. It represents an optimal allocation strategy right now and, because we calculate it as a rolling index, on a daily basis since the back-fill date (3 January 2000).

GOCMX versus S&P 500

Last month, we published several exhibits describing the historical performance of the GOCMX on both an absolute basis and compared to stocks, bonds, etc. (Read our earlier post.) We can just as easily compare the GOCMX to an index like the S&P 500, which serves as a barometer for a purely stock-obsessed investment strategy.

The following exhibit shows that our index has outperformed the S&P 500 by 84.2% since the year 2000. But what about risk? By clicking on the thumbnail images below, you can see the GOCMX has achieved these results with less risk (per unit of reward) than an equities-only strategy.

GOCMX Returns

GOCMX Volatility

GOCMX Reward-to-Risk

Of course, the GOCMX is not designed to “beat” any single asset category (or investment strategy). It is, after all, a long-only blend of all the major categories. Thus, the index will at all times be underperforming some categories, on both a pure-return and risk-adjusted basis, while outperforming others. So comparing the GOCMX on a one-to-one basis to large-cap U.S. stocks — while a bit pernicious — emphasizes the extent to which investors may benefit from asset allocation over stock-picking alone. And with a tool like this, there need not be anything difficult or cost-prohibitive to establishing a robust, global allocation strategy.

Pricing

While we will continue to update the index publicly at irregular intervals, the underlying data and exhibits are available at the following low prices:

• Weekly updates: $80 per year (updates published each weekend)
• Monthly updates: $60 per year (updates last weekend of every month)
• Quarterly updates: $40 per year (updates last weekend of every quarter)

Send us an e-mail if you are interested in one of these plans. We can deliver the data by e-mail or make it available for download from the site, in Excel 2003 or 2007 formats, and/or CSV. (Basically, any way you need it.) Each plan includes not just the headline index data, but the specific allocations to each asset class over the life of the index (the five sub-indexes; for more information, see our previous post). We expect to raise prices in the future, but you can lock in the current rates for a year.

In future posts, we will discuss means by which to put a global-allocation strategy into effect — e.g., by using ETFs and active or passive funds, having your broker do it, or pursuing alpha by diverging from the GOCMX as a baseline allocation strategy.

In the meantime, if you have a questions about the index or would like more information about pricing etc., send us an e-mail or better yet, post a comment to this entry. ♦