Vigilant Asset Allocation - Aggressive

VAA (Vigilant Asset Allocation), Aggressive is the strategy that started Keller & Keuning's canary lineage, and the simplest of the family to describe. It watches four assets: U.S. large caps, developed international stocks, emerging markets, and U.S. aggregate bonds. Each month it scores all four on the same weighted momentum measure, giving the most recent month the heaviest vote. If every one of the four is positive, the strategy puts the entire portfolio into whichever is strongest. If even one of the four is negative, it steps aside entirely and moves everything into the best of three defensive assets: corporate bonds, intermediate Treasuries, or short Treasuries.

The distinguishing idea is where the warning comes from. Later Keller strategies like DAA and BAA watch a separate set of "canary" assets they never actually hold. VAA judges the assets it buys. If one of the four things it might own looks sick, that is enough to stand down completely, whether or not the strategy was planning to own that particular one. It is a blunter rule, and a more direct one.

Two features are worth understanding before using it. Bonds sit in the offensive lineup, not the defensive one, so the strategy can be fully risk-on while holding nothing but aggregate bonds, and a bond selloff counts as one of the four warning signs. And the defensive side has no true cash position: one of the three defensive assets is always held when the strategy retreats, even in a period when all three are falling. That gap is exactly what the later Bold Asset Allocation fixed by requiring a defensive asset to beat T-bills before it can be held, and comparing the two through 2022 shows what the fix was worth.

The portfolio is one asset at a time, one hundred percent, reset monthly. That means real exposure between decision points, since the strategy only looks at month-end data. A downturn that begins early in the month is carried in full until the month ends. Turnover is high and gains are mostly short-term, so this belongs in a tax-deferred account.

VAA reads best alongside DAA and BAA rather than alone. It is the ancestor, and seeing all three together shows what each generation was trying to repair.

VAA Aggressive uses no leverage. For more details, see Breadth Momentum and Vigilant Asset Allocation (VAA): Winning More by Losing Less.