New Momentum Portfolios

In 2011 Scott’s Investments began tracking a momentum portfolio which ranks a basket of ETFs based on price momentum and volatility.  In 2014 I also introduced a pure momentum system, which ranks the same basket of ETFs based solely on 6 month price momentum. The first portfolio was previously called the “ETFReplay.com Portfolio” but going forward it will be called the “Conservative Momentum Portfolio” (or “6/3/3 strategy”) to reflect some changes in the portfolio and tracking methodology for both portfolios detailed below.

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In previous years the Conservative Momentum Portfolio  began with a static basket of 14 ETFs.  The basket of 14 ETFs will be reduced to 10 ETFs. This change is being made in order to further simplify the portfolio. The 10 ETFs are listed below:

RWX SPDR DJ International Real Estate
PCY PowerShares Emerging Mkts Bond
EFA iShares MSCI EAFE
EEM iShares MSCI Emerging Markets
VNQ Vanguard MSCI U.S. REIT
TIP iShares Barclays TIPS
VTI Vanguard MSCI Total U.S. Stock Market
GLD SPDR Gold Shares
TLT iShares Barclays Long-Term Trsry
SHY iShares Barclays 1-3 Year Treasry Bnd Fd

 

The ETFs will still be ranked by 6 month total returns (weighted 40%), 3 month total returns (weighted 30%), and 3 month price volatility (weighted 30%). The top 3 will be purchased  at the beginning of each month and if a holding drops out of the top 3 at the next month’s rebalance it will be replaced. Previously, the portfolio purchased the top 4 ETFs and only sold when a holding dropped out of the top 5. In addition, ETFs previously had to be ranked above the cash-like ETF (SHY) in order to be included in the portfolio. This requirement will be removed, so the top 3 ETFs will be held regardless of proximity to SHY.

The real-time performance of the portfolio is below, which reflects any changes made since inception:

ETFReplay

Pure Momentum System

The pure momentum system previously ranked  ETFs based solely on 6 month price momentum.  For 2015 the strategy will now rank ETFs based on 5 month price momentum. There is no cash filter in the pure momentum system, volatility ranking, or requirement to limit turnover. Previously the strategy bought the top 4 ETFs each month – going forward the top 3 ETFs will be purchased. The portfolio and rankings are posted on the same spreadsheet as the 6/3/3 strategy.

The one year performance of the Pure Momentum system is below:

Pure momentum

The portfolio names are dropping “ETFreplay.com” because the strategy can be tracked on multiple website.  ETFReplay.com is still an excellent choice for tracking and backtesting the strategies detailed. However, a formidable free option for backtesting these strategies has emerged at Portfolio Visualizer.

The current top 3 ETFs are listed below for each strategy (top 3 are the same for both strategies):

PCY PowerShares Emerging Mkts Bond
SHY iShares Barclays 1-3 Year Treasry Bnd Fd
VNQ Vanguard MSCI U.S. REIT

 

The current portfolios are below:

Conservative Momentum

Position Shares Purchase Date
PCY 155 11/30/2015
VNQ 53 11/30/2015
SHY 49 12/31/2015

 

Pure Momentum

Position Shares Purchase Date
PCY 117 8/31/2015
SHY 37 12/31/2015
VNQ 40 10/30/2015

 

Current signals can be viewed on Scott’s Investments here.