Getting Started with BestFolio
From zero to your first monthly rebalance in 7 steps. No finance degree required.
In this guide
What is Tactical Asset Allocation?
Tactical Asset Allocation (TAA) is a rules-based approach to investing that adjusts your portfolio based on market conditions. Instead of holding the same mix of stocks and bonds forever, TAA strategies rotate between asset classes — equities, bonds, gold, cash — based on signals like momentum, trend, or volatility.
The goal is simple: be in stocks when they are going up, and shift to safer assets when trouble is coming. These are not gut feelings or predictions. Each strategy follows a specific, published set of rules that anyone can verify.
Most TAA strategies only require you to check in once a month, look at the new signal, and make a few trades. It typically takes 10-15 minutes.
Browse the Strategy Library
BestFolio tracks 63 published strategies from researchers like Wouter Keller, Meb Faber, and Gary Antonacci. Each strategy is a specific set of rules that has been backtested with real historical data going back 30+ years.
On the Strategies page, you will see cards for each strategy. Here is what the badges mean:
What to look for
Start with the free strategies: GEM (Global Equities Momentum), Permanent Portfolio, Paired Switching, and RP Gold+SCV. These are excellent entry points for learning how TAA works.
Understand a Strategy
When you open a strategy, you will see a lot of numbers. Here are the ones that matter most:
CAGR (Compound Annual Growth Rate)
The average annual return over the backtest period. Think of it as 'how much did this strategy grow per year, on average?' A CAGR of 10% means your money roughly doubled every 7 years.
Sharpe Ratio
How much return you got for each unit of risk. Higher is better. A Sharpe above 1.0 is considered excellent. Above 0.7 is good. Below 0.5 is mediocre.
Max Drawdown
The worst peak-to-trough decline in the strategy's history. If the max drawdown is -20%, that means at some point the strategy lost 20% from its high. This is the number that tells you how much pain you need to tolerate.
Volatility
How much the strategy's returns bounce around. Lower volatility means a smoother ride. High-volatility strategies can gain or lose a lot in a single month.
Sortino Ratio
Similar to Sharpe, but only penalizes downside risk (losses), not upside volatility. A strategy with high upside swings but controlled downside will have a better Sortino than Sharpe.
What to look for
The backtest chart (Growth of $100) is the quickest way to evaluate a strategy. Look at how the line behaves during 2008 and 2020 — those are the stress tests. A good TAA strategy should show smaller drawdowns than the S&P 500 during crashes.
Compare Strategies Side by Side
Once you have found a few strategies that interest you, use the Compare page to see them all in a sortable table. You can sort by any metric — Sharpe ratio is a good starting point because it balances return and risk.
For a more visual comparison, the Performance page lets you chart multiple strategies together. Select 3-5 strategies and a benchmark (S&P 500), and you will see their growth curves, drawdowns, and period returns in one view.
The Risk vs Return scatterplot is another useful tool. It plots every strategy on a chart where the X axis is risk (volatility or max drawdown) and the Y axis is return (CAGR or Sharpe). Strategies in the top-left corner give you the most return for the least risk.
What to look for
Look for strategies that are not correlated with each other. The Correlations page shows you which strategies move together and which move independently. A portfolio of uncorrelated strategies provides better diversification than any single strategy alone.
Build Your Portfolio
A BestFolio portfolio combines multiple strategies into a single blended allocation. Each strategy becomes a 'sleeve' with a percentage weight you choose. For example, you might allocate 30% to GEM, 25% to HAA, 25% to a bond timing strategy, and 20% to a leveraged strategy.
There are two ways to set weights:
Manual (Portfolios page)
Choose your own weights based on your research and risk tolerance. This gives you full control. Go to Portfolios, click 'New Portfolio,' and add sleeves one by one.
Optimized (Smart Blending page)
Let BestFolio calculate optimal weights using four methods: Equal Weight, Risk Parity, Minimum Variance, and Maximum Sharpe. Select your strategies, click 'Optimize,' and save the result you like best as a portfolio.
What to look for
After creating a portfolio, check the blended backtest. This shows you how your specific combination would have performed historically — including through crashes. If the max drawdown is deeper than you can stomach, adjust your weights toward more conservative strategies.
Your Monthly Routine
TAA strategies only change their signals once a month, at month-end. Your monthly routine takes about 10-15 minutes:
- 1Log in to BestFolio on the 1st or 2nd of the month.
- 2Check your Dashboard. Look at the regime badges on your strategy sleeves. If any changed (e.g., from Offensive to Defensive), you need to trade.
- 3Go to Live Tracking (if you use IBKR). Click 'Sync IBKR' to pull your latest positions. The deviation report will show you exactly what to buy and sell, including share counts.
- 4Execute the trades at your broker. For most months, you will have 2-5 trades. Some months, nothing changes and you do nothing.
- 5Verify. After trading, sync IBKR again to confirm your positions match the target allocation.
What to look for
Set a recurring calendar reminder for the 1st of each month. The Alerts page can also send you Telegram or email notifications when signals change, so you never miss a rebalance.
Advanced Features
Once you are comfortable with the basics, BestFolio has deeper tools for serious portfolio construction:
UCITS Alternatives
European investors can substitute US ETFs with UCITS-compatible equivalents. Open any strategy and scroll to the UCITS panel, or configure your preferences globally in Settings.
Execution Rollup
If your blended portfolio has many small positions (e.g., 2% in each of 5 bond ETFs), the rollup feature merges them into larger positions to reduce your trade count. Find it on the Portfolios page.
Walk-Forward Analysis
The ultimate test of a strategy blend. Walk-forward optimization uses rolling windows to compute truly out-of-sample performance — the closest thing to seeing how your portfolio would have done in real time.
Correlation Analysis
See how your strategies correlate over time. Low correlation between strategies means better diversification. The rolling correlation chart shows whether correlations change during market stress.
Strategy-Asset Matrix
A bird's-eye view showing which assets each strategy currently holds. Useful for spotting concentration risk — if 80% of your strategies are holding SPY, you are not as diversified as you think.
Underperformer Watchlist
Automatically flags strategies that are underperforming their historical averages. Helps you decide whether a strategy is going through a normal rough patch or needs to be replaced.
Ready to get started?
Explore 4 free strategies, then upgrade to Pro for the full library.