ETFReplay.com Portfolio – August Update

The ETFReplay.com Portfolio holdings have been updated for August 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 14 ETFs. These 14 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.

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 cash filter is in effect this month.  SHY is the highest rated ETF in the 6/3/3 system.  Therefore,SHY will continue to be the sole holding in the portfolio.

The top 5 ranked ETFs based on the 6/3/3 system as of 7/31/15 are below:

6mo/3mo/3mo
SHY Barclays Low Duration Treasury (2-yr)
VTI Vanguard Total U.S. Stock Market
HYG iShares iBoxx High-Yield Corp Bond
PCY PowerShares Emerging Mkts Bond (7-9yr)
TIP iShares Barclays TIPS

 

In 2014 I introduced a pure momentum system, which ranks the same basket of 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 are purchased each month. The portfolio and rankings are posted on the same spreadsheet as the 6/3/3 strategy.

The top 4 six month momentum ETFs are below:

6 month Momentum
EFA iShares MSCI EAFE
VTI Vanguard Total U.S. Stock Market
SHY Barclays Low Duration Treasury (2-yr)
HYG iShares iBoxx High-Yield Corp Bond

 

(EEM), a holding for just one month, will be sold for a loss of 6.31%.  (RWX), a holding since April, will be sold for a loss of 3.89%.  They will be replace by (VTI) and (SHY).

The updated holdings for each portfolio are below.

6/3/3 strategy:

Position Shares Avg Purchase Price Purchase Date Cost Basis Current Value Gain/Loss Excluding Dividends
SHY 149 84.86 5/29/2015 & 6/30/15 $12,644.14 $12,644.14 $0.00

 

Pure Momentum strategy:

Position Shares Purchase Price Purchase Date Cost Basis Current Value Gain/Loss Excluding Dividends
VTI 22 108.84 7/31/2015 $2,394.48 $2,394.48 $0.00
SHY 29 84.86 7/31/2015 $2,460.94 $2,460.94 $0.00
HYG 27 88.8 6/30/2015 $2,397.60 $2,375.19 -$22.41
EFA 39 66.51 4/30/2015 $2,593.89 $2,526.42 -$67.47