Meb Faber’s Tactical Asset Allocation strategy is an active trend-following strategy that uses market timings and allocates assets across four asset classes: stocks, bonds, REITs, and commodities. These four asset classes are divided into five categories: U.S. stocks, foreign stocks, U.S. bonds, U.S. REITs, and World Commodities.

Using this strategy, you do not need to be in the market 100% of the time and expose yourself to additional risk, unlike passive/lazy strategies. You enter the market when Faber’s tactical asset allocation strategy gives an entry signal and exit when the strategy gives an exit signal.

Meb Faber’s Tactical Asset Allocation strategy can be implemented using five different index ETFs that are well-diversified and have good historical performance. There is no need to pick individual stocks, bonds, REITs, and other asset classes, or spending a lot of time and effort on this.

In this article, we will describe in detail the structure of the Faber Tactical Asset Allocation strategy and backtest it on historical price data.

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Looking ahead, we can say that according to our backtests over the past 16 years, the Faber Tactical Asset Allocation strategy has the following performance stats:

Compound annual return (CAR): 4.54%;
Maximum drawdown (MDD): -13.24%;
CAR/MDD ratio: 0.34;
Standard deviation: 6.91%;
Sharpe ratio (with a risk-free rate of 3%): 0.22.

Table of contents:

Who Is Meb Faber

Meb Faber is the co-founder and chief investment officer of Cambria Investment Management. Faber manages ETFs, individual accounts, and private equity funds in Cambria.

Meb Faber is the author of numerous white papers and five books. He is a frequent lecturer and writer on investment strategies and has published in Barron’s, The New York Times, and The New Yorker.

Meb Faber graduated from the University of Virginia with a double degree in engineering and biology.

He has a pretty big following on Twitter and is active on social media.

What Is The Faber Tactical Asset Allocation Portfolio

Meb Faber recommends using the following five asset classes that have the same portfolio weights:

Meb Faber Tactical Asset Allocation Trading Strategy

Asset Class	Portfolio Weight
U.S. Stocks	20%
Foreign Stocks	20%
U.S. Bonds	20%
U.S. REITs	20%
World Commodities	20%

Stocks In The Faber Tactical Asset Allocation Portfolio

Stocks are equity securities representing ownership (share/parts) in a corporation and g