Traders' Roundtable

For anyone devising an asset allocation solution using bond funds, is anyone generating a mixed portfolio in CSI US of bond and equity funds?

It represents a tricky situation in terms of dividends and their treatment. The basic point is there is no point treating dividends on bond funds in the way TB treats dividends on equities. You need to use a total return series.

Here is an example. Which of these two series do you want to use to back test a momentum strategy? The same considerations apply to any stock paying large dividends such as a RIET. And for a real laugh of course, try comparing price and total return on a money market fund.

While not entirely accurate I use total return series. Of course knowing my results are a bit optimistic. In the real world of trading this does not amount to a tremendous difference. I have been using this methodology for many years and find by assigning additional slippage to my fixed income series I get real close to actual.