Early in 2012 Scott’s Investments added a daily Ivy Portfolio spreadsheet. This tool uses Google Documents and Yahoo Finance to track the 10 month moving average signals for two of the portfolios listed in Mebane Faber’s book The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets. Faber discusses 5, 10, and 20 security portfolios that have trading signals based on long-term moving averages.
The Ivy Portfolio spreadsheet tracks the 5 and 10 ETF Portfolios listed in Faber’s book. When a security is trading below its 10 month simple moving average, the position is listed as “Cash”. When the security is trading above its 10 month simple moving average the positions is listed as “Invested”.
The spreadsheet’s signals update once daily (typically in the evening) using dividend/split adjusted closing price from Yahoo Finance. The 10 month simple moving average is based on the most recent 10 months including the current month’s most recent daily closing price. Even though the signals update daily, it is not an endorsement to check signals daily. It simply gives the spreadsheet more versatility for user’s to check at their leisure.
The page also displays the percentage each ETF within the Ivy 10 and Ivy 5 Portfolio is above or below the current 10 month simple moving average, using both adjusted and unadjusted data.
If an ETF has paid a dividend or split within the past 10 months, then when comparing the adjusted/unadjusted data you will see differences in the percent an ETF is above/below the 10 month SMA. This could also potentially impact whether an ETF is above or below its 10 month SMA. Regardless of whether you prefer the adjusted or unadjusted data, it is important to remain consistent in your approach.
I do not track these portfolios as hypothetical portfolios like I do with other portfolios on the site. However, I will periodically post backtest results on the strategy. Below are updated backtest results for the Ivy Portfolio using ETFReplay.com.
The Ivy 5 Portfolio, using a 10 month moving average and updated monthly has performed as follows since 2008 and compared to SPY:
The Ivy 10 Portfolio, using a 10 month moving average and updated monthly has performed as follows since 2008 and compared to SPY:
The strategy’s strength is avoiding significant drawdowns during periods of market turbulence, such as 2008. During periods of strong uptrending equity markets it has the potential to under-perform a benchmark such as SPY. “Choppy” markets, in which markets are trend-less can also reduce the strategy’s returns as securities bounce above and below long-term moving averages without establishing a trend.
The current signals based on July 27th’s closing prices are below. While equity markets have had a turbulent few weeks and months, the US-linked equity ETFs, VB and VTI, remain above their long-term moving average. Real-estate linked ETFs remain the strongest sector in terms of their percent above their 10 month moving average. Global equity ETFs, VWO and VEU, remain below their respective long-term moving averages as do commodity-linked ETFs DBC and GSG. However, it is worth noting that other popular commodity linked ETFs that focus on agricultural commodities, such as the Powershares DB Agriculture Fund (DBA), are presently above long-term moving averages.
The first table is based on adjusted historical data and the second table is based on unadjusted price data: