ETFREPLAY.COM Portfolio for January

The ETFReplay.com Portfolio holdings have been updated for January 2015.  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.

Starting in 2015 the basket of 15 ETFs will be reduced to 14 in order to further simplify the strategy.  PowerShares DB Agricultural Commodities (DBA) has been removed. The 14 ETFs are listed below:

Symbol Name
RWX SPDR DJ International Real Estate
PCY PowerShares Emerging Mkts Bond
WIP SPDR Int’l Govt Infl-Protect Bond
EFA iShares MSCI EAFE
HYG iShares iBoxx High-Yield Corp Bond
EEM iShares MSCI Emerging Markets
LQD iShares iBoxx Invest Grade Bond
VNQ Vanguard MSCI U.S. REIT
TIP iShares Barclays TIPS
VTI Vanguard MSCI Total U.S. Stock Market
DBC PowerShares DB Commodity Index
GLD SPDR Gold Shares
TLT iShares Barclays Long-Term Trsry
SHY iShares Barclays 1-3 Year Treasry Bnd Fd

 

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In addition, ETFs must be ranked above the cash-like 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 4 ranked ETFs based on the 6/3/3 system as of 12/31/14 are below:

6mo/3mo/3mo
TLT iShares Barclays Long-Term Trsry
LQD iShares iBoxx Invest Grade Bond
VNQ Vanguard MSCI U.S. REIT
SHY Barclays Low Duration Treasury

 

For January 50% of our current position in SHY will be sold and the proceeds used to purchase VNQ. The strategy continues to hold TLT, LQD, and a reduced position in SHY.

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 (now 14) 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 4 six month momentum ETFs are below:

6 month Momentum
TLT iShares Barclays Long-Term Trsry
VNQ Vanguard MSCI U.S. REIT
VTI Vanguard Total U.S. Stock Market
LQD iShares iBoxx Invest Grade Bond

 

The 6 month momentum system maintains positions in TLT, VNQ, and VTI. PCY will be sold and the proceeds used to purchase LQD.

Below is a 2 year equity curve for the conservative strategy:

etfreplay conservative

Below is a 1 year equity curve for the aggressive strategy:

etfreplay aggressive

2 thoughts on “ETFREPLAY.COM Portfolio for January”

  1. How have your portfolios done in 2014? It isn’t easy to see a 12 month comparison from your charts.

    Steve

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