ETFReplay.com Portfolio for November

The ETFReplay.com Portfolio holdings have been updated for November 2014.  I previously detailed here and here how an investor can use ETFReplay.com to screen for best performing ETFs based on momentum and volatility.

The portfolio begins with a static basket of 15 ETFs. These 15 ETFs are ranked by 6 month total returns (weighted 40%), 3 month total returns (weighted 30%), and 3 month price volatility (weighted 30%). The top 4 are purchased  at the beginning of each month. When a holding drops out of the top 5 ETFs it will be sold and replaced with the next highest ranked ETF.

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In addition, ETFs must be ranked above the cash ETF SHY in order to be included in the portfolio, similar to the absolute momentum strategy I profiled here. This modification could help reduce drawdowns during periods of high volatility and/or negative market conditions (see 2008-2009), but it could also reduce total returns by allocating to cash in lieu of an asset class.

The top 5 ranked ETFs based on the 6/3/3 system as of 10/31/14 are below:

6mo/3mo/3mo
VNQ Vanguard MSCI U.S. REIT
PCY PowerShares Emerging Mkts Bond
TLT iShares Barclays Long-Term Trsry
LQD iShares iBoxx Invest Grade Bond
VTI Vanguard Total U.S. Stock Market

The portfolio maintains positions all of its current positions for November- TLT, PCY, LQD and VTI.

Beginning in 2014 we track both the 6/3/3 strategy (same system as 2013) as well as the pure momentum system, which will rank the same basket of 15 ETFs based solely on 6 month price momentum. There is no cash filter in the pure momentum system, volatility ranking, or requirement to limit turnover – the top 4 ETFs based on price momentum will be purchased each month. The portfolio and rankings will be posted on the same spreadsheet as the 6/3/3 strategy.

The top 5 six month momentum ETFs are below:

6 month Momentum
VNQ Vanguard MSCI U.S. REIT
TLT iShares Barclays Long-Term Trsry
VTI Vanguard Total U.S. Stock Market
PCY PowerShares Emerging Mkts Bond
RWX SPDR DJ International Real Estate

The 6 month momentum system maintains all of its current positions for November – TLT, PCY, VTI, and VNQ.