December Update – Portfolio

The Portfolio holdings have been updated for December 2015.  I previously detailed here and here how an investor can use 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
HYG iShares iBoxx High-Yield Corp Bond
EEM iShares MSCI Emerging Markets
LQD iShares iBoxx Invest Grade Bond
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 had been in effect since July 2015 but this month four new positions will be added.

The top 5 ranked ETFs based on the 6/3/3 system as of 11/30/15 are below:

PCY PowerShares Emerging Mkts Bond
LQD iShares iBoxx Invest Grade Bond
TLT iShares Barclays Long-Term Trsry
SHY Barclays Low Duration Treasury (2-yr)


Thus, the portfolio will purchase PCY, VNQ, LQD, and TLT.

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
TLT iShares Barclays Long-Term Trsry
PCY PowerShares Emerging Mkts Bond
LQD iShares iBoxx Invest Grade Bond


This month (SHY) will be sold and the proceeds used to purchase (LQD).

The updated holdings for the pure momentum portfolio is below:

Position Purchase Price Purchase Date Percentage Gain/Loss Excluding Dividends
PCY 27.65 8/31/2015 0.94%
LQD 115.91 11/30/2015 0.00%
VNQ 79.89 10/30/2015 -0.63%
TLT 122.74 10/30/2015 -1.05%

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