Tag Archives: etfreplay

ETFReplay.com July Update

The ETFReplay.com Portfolio holdings have been updated for July 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, all current holdings will be sold and the proceeds used to purchase SHY.

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

6mo/3mo/3mo
SHY Barclays Low Duration Treasury (2-yr)
EFA iShares MSCI EAFE
HYG iShares iBoxx High-Yield Corp Bond (4-5yr)
PCY PowerShares Emerging Mkts Bond (7-9yr)
VTI Vanguard Total U.S. Stock Market

 

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
EEM iShares MSCI Emerging Markets
RWX SPDR DJ International Real Estate
HYG iShares iBoxx High-Yield Corp Bond (4-5yr)

 

(VTI), a holding since September 2014 will be sold for a 5%+ gain and replaced by (EEM).  (TLT), a holding since September 2014 will be sold for a  1%+ gain and replaced by (HYG).

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 Percentage Gain/Loss Excluding Dividends
SHY 149 84.86 5/29/2015 & 6/30/15 $12,644.14 $12,644.14 $0.00 0.00%

 

Pure Momentum strategy:

Current Positions Position Shares Purchase Price Purchase Date Cost Basis Current Value Gain/Loss Excluding Dividends Percentage Gain/Loss Excluding Dividends
EEM 60 39.62 6/30/2015 $2,377.20 $2,377.20 $0.00 0.00%
RWX 64 43.99 4/2/2015 $2,815.36 $2,679.04 -$136.32 -4.84%
HYG 27 88.8 6/30/2015 $2,397.60 $2,397.60 $0.00 0.00%
EFA 39 66.51 4/30/2015 $2,593.89 $2,476.11 -$117.78 -4.54%

ETFReplay Portfolio for December

Among the more popular portfolios on Scott’s Investments has been the ETFReplay.com Portfolio.  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.

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 as of 11/29/13 are below:

Top 50 Trending Stocks

6mo/3mo/3mo
HYG iShares iBoxx High-Yield Corp Bond
EFA iShares MSCI EAFE
VTI Vanguard MSCI Total U.S. Stock Market
RWX SPDR DJ International Real Estate
SHY Barclays Low Duration Treasury

Since cash (represented by SHY) is now the fifth highest rated ETF, anything rated above it qualifies for purchase. In October SHY was the third highest rated ETF and in November it was the fourth highest rated ETF.

For December the portfolio maintains positions in VTI, HYG and EFA. The portfolio held 25% cash in November, which is being allocated to RWX for December.

The strategy’s performance since inception is below, as is comparative performance of the SPDR S&P 500 ETF (SPY), iShares Growth Allocation (AOR), and the Permanent Portfolio (PRPFX):

ETFREPLAY

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ETFReplay Portfolio for November

Among the more popular portfolios on Scott’s Investments has been the ETFReplay.com Portfolio. The strategy has been revised and improved for 2013 in order to make it simpler to follow.

I previously detailed here and here how an investor can use ETFReplay.com to screen for best performing ETFs based on momentum and volatility.   I select only the top 4 ETFs out of a static basket of  ETFs and re-balance the portfolio monthly.

For 2013 the static basket of ETFs was reduced from 25 to 15. From this basket of 15, the top 4 are purchased each month. The portfolio will be re-balanced 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. I added the top 5 requirement in order to further limit turnover. ETFs will be ranked on a combination of their 6 month returns, 3 month returns, and 3 month volatility (lower volatility receives a higher ranking).

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 as of 10/31/13 are below:

 

VTI Vanguard MSCI Total U.S. Stock Market
HYG iShares iBoxx High-Yield Corp Bond
EFA iShares MSCI EAFE
SHY Barclays Low Duration Treasury
WIP SPDR Int’l Govt Infl-Protect Bond

Since cash (represented by SHY) is the fourth highest rated ETF, anything rated below it does not qualify for purchase. Last month SHY was the third highest rated ETF, so November is positioned less defensively than October.

For November the portfolio maintains positions in VTI and EFA, and keeps approximately 25% in cash. HYG will be purchased using October 31st’s closing price.  A more aggressive approach would disregard the cash filter. However, the objective of the portfolio is balance risk and reward while reducing drawdowns.

The strategy’s performance since inception is below, as is comparative performance of the SPDR S&P 500 ETF (SPY), iShares Growth Allocation (AOR), and the Permanent Portfolio (PRPFX):

etfreplay

ETFReplay Portfolio for October

Among the more popular portfolios on Scott’s Investments has been the ETFReplay.com Portfolio. The strategy has been revised and improved for 2013 in order to make it simpler to follow.

I previously detailed here and here how an investor can use ETFReplay.com to screen for best performing ETFs based on momentum and volatility.   I select only the top 4 ETFs out of a static basket of  ETFs and re-balance the portfolio monthly.

For 2013 the static basket of ETFs was reduced from 25 to 15. From this basket of 15, the top 4 are purchased each month. The portfolio will be re-balanced 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. I added the top 5 requirement in order to further limit turnover. ETFs will be ranked on a combination of their 6 month returns, 3 month returns, and 3 month volatility (lower volatility receives a higher ranking).

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 as of 9/30/13 are below:

EFA iShares MSCI EAFE
VTI Vanguard MSCI Total U.S. Stock Market
SHY Barclays Low Duration Treasury
HYG iShares iBoxx High-Yield Corp Bond
RWX SPDR DJ International Real Estate

Since cash is the third highest rated ETF, anything rated below it does not qualify for purchase. This is still a somewhat a defensive allocation, as a result of recent volatility and negative performance in a variety of equity, commodity and bond markets.

For October the portfolio is purchasing VTI and EFA, and will keep 50% in cash. A more aggressive approach would disregard the cash filter. However, the objective of the portfolio is balance risk and reward while reducing drawdowns.

The strategy’s performance since inception is below, as is comparative performance of the SPDR S&P 500 ETF (SPY), iShares Growth Allocation (AOR), and the Permanent Portfolio (PRPFX):

etfreplay october

ETFReplay Portfolio for August

Among the more popular portfolios on Scott’s Investments has been the ETFReplay.com Portfolio. The strategy has been revised and improved for 2013 in order to make it simpler to follow.

I previously detailed here and here how an investor can use ETFReplay.com to screen for best performing ETFs based on momentum and volatility.   I select only the top 4 ETFs out of a static basket of  ETFs and re-balance the portfolio monthly.

For 2013 the static basket of ETFs was reduced from 25 to 15. From this basket of 15, the top 4 are purchased each month. The portfolio will be re-balanced 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. I added the top 5 requirement in order to further limit turnover. ETFs will be ranked on a combination of their 6 month returns, 3 month returns, and 3 month volatility (lower volatility receives a higher ranking).

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 as of 7/31/13 are below:

VTI Vanguard MSCI Total U.S. Stock Market
SHY Barclays Low Duration Treasury
EFA iShares MSCI EAFE
HYG iShares iBoxx High-Yield Corp Bond
LQD iShares iBoxx Invest Grade Bond

This is little changed compared to last two months. Since cash is the second highest rated ETF, anything rated below it does not qualify for purchase. This is a defensive allocation, as a result of recent volatility and negative performance in a variety of equity, commodity and bond markets.

For August the portfolio remains allocated to cash and US equities. A more aggressive approach would disregard the cash filter. However, the objective of the portfolio is balance risk and reward while reducing drawdowns.

The strategy’s performance since inception is below, as is comparative performance of the SPDR S&P 500 ETF (SPY), a balanced allocation ETF, the iShares Growth Allocation (AOR), and the Permanent Portfolio (PRPFX):

etfreplay

Backtesting Portfolio Strategies

Several readers inquired recently about backtested results of various portfolio strategies tracked on Scott’s Investments. Several of the portfolios on this site are tracked real-time and I have also posted dozens of backtests on the site (use the search bar on the right-hand side of the site), but I have posted some updated results below.

The most important caveat regarding the tests below is that the time-frame is incredibly short by historical standards. Good results should not be taken as a guarantee of future results, and lower than expected results should not necessarily be interpreted as a strategy failure.  All tests were conducted using ETFReplay.com

The first set of tests use the parameters of the ETFReplay.com Portfolio and was conducted on a short time frame (2009-2013) due to shorter trading histories for many of the 15 ETFs used in the strategy.  To simplify the tests I did not incorporate the “top 5” filter where an ETF has to drop out of the top 5 before being sold. The tests use the “6/3/3” strategy, and the cash filter requires the ETFs be ranked above SHY in order to be held. The benchmark used is Vanguard Balanced Index Fund (VBINX):

2009-2013 Total Return Volatility CAGR Sharpe Max Drawdown
Top 4, No cash filter, Updated Monthly 87.60% 12% 15.30% 1.15 -8.60%
Top 4, cash filter, Updated Monthly 83.90% 11.80% 14.80% 1.13 -8.60%
VBINX 71.80% 12% 13.10% 0.97 -17.50%

 

The Ivy Portfolio is a popular strategy and the best historical results can be found in Mebane Faber’s The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets. The results below were generated using a slightly different set of ETFs due to their longer trading histories:

2005-2013 Total Return Volatility CAGR Sharpe Max Drawdown
Ivy Portfolio 66.10% 9.80% 6.20% 0.37 -14.70%
VBINX 64.90% 12.70% 6.10% 0.3 -36%
Ivy Portfolio Symbols Used in Test
SPY
AGG
EFA
GSCI Index
VNQ

Finally, the last set of tests analyzes the All-Weather and Permanent Portfolio.  The All-Weather portfolio is not equal weighted, while the Permanent Portfolio equal weights the four positions. For the static weightings used in the All-Weather test please view the portfolio spreadsheet. The All-Weather risk parity allocation changes based on the trailing 20 day volatility and allocations were updated monthly. For the current weightings view the spreadsheet on Scott’s Investments:

2005-2013 Total Return Volatility CAGR Sharpe Max Drawdown
All-Weather, Annual Rebalance 85.30% 6.00% 7.60% 0.8 -19.83%
All-Weather, Risk-Parity using 20 day volatility, monthly rebalance 83.10% 4.60% 7.50% 1.04 -18.30%
Permanent Portfolio, Annual Rebalance 99.30% 7.50% 8.60% 0.77 -14.03%
All-Weather Symbols Perm.
GLD GLD
GSCI Index SHY
IEF SPY
PREMX TLT
TLT
VIPSX
VTI
VWEHX

If you enjoy these tools and content, please consider making a donation on the home page of Scott’s Investments using the Paypal link in the upper-right corner!

ETFReplay Portfolio for June

Among the more popular portfolios on Scott’s Investments has been the ETFReplay.com Portfolio. The strategy has been revised and improved for 2013 in order to make it simpler to follow.

I previously detailed here and here how an investor can use ETFReplay.com to screen for best performing ETFs based on momentum and volatility.   I select only the top 4 ETFs out of a static basket of  ETFs and re-balance the portfolio monthly. Previously, the static basket of ETFs was 25. This number of ETFs creates a high degree of turnover and also creates cross-over among ETFs that have a high correlations. For example, if you are only purchasing 4 ETFs each month and 2 or 3 of the ETFs are highly correlated, there is little benefit in holding more than 1 of the ETFs.

For 2013 the static basket of ETFs was reduced to 15. From this basket of 15, the top 4 will be selected each month. The portfolio will be re-balanced 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. I added the top 5 requirement in order to further limit turnover. ETFs will be ranked on a combination of their 6 month returns, 3 month returns, and 3 month volatility (lower volatility receives a higher ranking).

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).

The top 5 ranked ETFs as of 5/31/13 are below:

VTI Vanguard MSCI Total U.S. Stock Market
SHY Barclays Low Duration Treasury (2-yr)
HYG iShares iBoxx High-Yield Corp Bond (4-5yr)
VNQ Vanguard MSCI U.S. REIT
EFA iShares MSCI EAFE

For June the strategy is moving to 75% cash. This will be the first time in 2013 that the absolute momentum filter has come into play and the first time since 2009 the strategy has less than 2 non-cash ETFs.  Since SHY is the second highest rated ETF, anything ranked below it will not be held.  The balance of the portfolio will continue to hold VTI since it is the highest rated ETF.

VNQ was sold for a gain of 2.4% and purchase date of 2/28/13, HYG for a loss of 1.52% and purchase date of 3/28/13, and RWX for a gain of .93% and purchase date of 10/31/12 (individual returns exclude any dividends).

The absolute momentum filter comes as somewhat of a surprise this month, although volatility increased in several asset classes in May. Time will tell if this conservative rotation helps reduce drawdowns or is a false signal.

 

ETFReplay Portfolio for May

Among the more popular portfolios on Scott’s Investments has been the ETFReplay.com Portfolio. The strategy has been revised and improved for 2013 in order to make it simpler to follow.

I previously detailed here and here how an investor can use ETFReplay.com to screen for best performing ETFs based on momentum and volatility.   I select only the top 4 ETFs out of a static basket of  ETFs and re-balance the portfolio monthly. Previously, the static basket of ETFs was 25. This number of ETFs creates a high degree of turnover and also creates cross-over among ETFs that have a high correlations. For example, if you are only purchasing 4 ETFs each month and 2 or 3 of the ETFs are highly correlated, there is little benefit in holding more than 1 of the ETFs.

For 2013 the static basket of ETFs was reduced to 15. From this basket of 15, the top 4 will be selected each month. The portfolio will be re-balanced 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. I added the top 5 requirement in order to further limit turnover. ETFs will be ranked on a combination of their 6 month returns, 3 month returns, and 3 month volatility (lower volatility receives a higher ranking).

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).

The top 5 ranked ETFs as of 4/30/13 are below:

VNQ –  Vanguard MSCI U.S. REIT
RWX – SPDR DJ International Real Estate
HYG – iShares iBoxx High-Yield Corp Bond
VTI – Vanguard MSCI Total U.S. Stock Market
LQD – iShares iBoxx Invest Grade Bond

For May there are no transactions, which is typically a good sign month to month. Current positions maintaining strength tend to equate to higher returns and lower transaction fees.

The four current positions are below:

Position Purchase Price Purchase Date Percentage Gain/Loss Excluding Dividends
RWX 40.74 10/31/2012 13.18%
HYG 94.35 3/28/2013 1.59%
VTI 78.24 2/28/2013 5.14%
VNQ 69.09 2/28/2013 8.96%

The portfolio is up over 22% since inception, which currently lags the S&P 500 (via the SPY ETF) on a nominal return basis. However, you can see the potential benefit during periods of equity pullbacks (of which we have had very few the past couple of years!) when the portfolio outperformed in 2011. It has also slightly outpaced a 60/40 balanced ETF and the Permanent Portfolio:

may etfreplay

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ETFReplay Portfolio for April

Among the more popular portfolios on Scott’s Investments has been the ETFReplay.com Portfolio. The strategy has been revised and improved for 2013 in order to make it simpler to follow.

I previously detailed here and here how an investor can use ETFReplay.com to screen for best performing ETFs based on momentum and volatility.   I select only the top 4 ETFs out of a static basket of  ETFs and re-balance the portfolio monthly. Previously, the static basket of ETFs was 25. This number of ETFs creates a high degree of turnover and also creates cross-over among ETFs that have a high correlations. For example, if you are only purchasing 4 ETFs each month and 2 or 3 of the ETFs are highly correlated, there is little benefit in holding more than 1 of the ETFs.

For 2013 the static basket of ETFs was reduced to 15. From this basket of 15, the top 4 will be selected each month. The portfolio will be re-balanced 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. I added the top 5 requirement in order to further limit turnover. ETFs will be ranked on a combination of their 6 month returns, 3 month returns, and 3 month volatility (lower volatility receives a higher ranking).

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).

The top 5 ranked ETFs as of 3/28/13 are below:

VTI – Vanguard MSCI Total U.S. Stock Market
HYG – iShares iBoxx High-Yield Corp Bond
RWX – SPDR DJ International Real Estate
VNQ – Vanguard MSCI U.S. REIT
LQD – iShares iBoxx Invest Grade Bond

For April the position iniShares MSCI EAFE (EFA) was closed for no gain/loss (excluding dividends). It was replaced by HYG, which is now ranked second on the list.

The four current positions are below:

Position Purchase Price Purchase Date Percentage Gain/Loss Excluding Dividends
RWX 40.74 10/31/2012 5.57%
HYG 94.35 3/28/2013 0.00%
VTI 78.24 2/28/2013 3.39%
VNQ 69.09 2/28/2013 2.08%

The portfolio is currently lagging the S&P 500 (via the SPY ETF) on a nominal basis since inception. However, you can see the potential benefit during periods of equity pullbacks (of which we have had very few the past couple of years!) when the portfolio outperformed in 2011:

 

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ETFReplay.com Portfolio – March Update

Among the more popular portfolios on Scott’s Investments has been the ETFReplay.com Portfolio. The strategy has been revised and improved for 2013 in order to make it simpler to follow.

I previously detailed here and here how an investor can use ETFReplay.com to screen for best performing ETFs based on momentum and volatility.   I select only the top 4 ETFs out of a static basket of  ETFs and re-balance the portfolio monthly. Previously, the static basket of ETFs was 25. This number of ETFs creates a high degree of turnover and also creates cross-over among ETFs that have a high correlations. For example, if you are only purchasing 4 ETFs each month and 2 or 3 of the ETFs are highly correlated, there is little benefit in holding more than 1 of the ETFs.

For 2013 the static basket of ETFs has been reduced to 15. From this basket of 15, the top 4 will be selected each month. The portfolio will be re-balanced 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. I added the top 5 requirement in order to further limit turnover. ETFs will be ranked on a combination of their 6 month returns, 3 month returns, and 3 month volatility (lower volatility receives a higher ranking).

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).

The top 5 ranked ETFs as of 2/28/13 are below:

RWX SPDR DJ International Real Estate
VTI Vanguard MSCI Total U.S. Stock Market
VNQ Vanguard MSCI U.S. REIT
HYG iShares iBoxx High-Yield Corp Bond (4-5yr)
EFA iShares MSCI EAFE

The position in iShares MSCI Emerging Markets (EEM) was closed for a loss of 2.57% (excluding dividends) and SPDR International Government Inflation Protected Bond (WIP) for a loss of 1.71% (excluding dividends). These positions were replaced by Vanguard MSCI Total US Stock Market (VTI) and Vanguard MSCI U.S. REIT (VNQ).

The four current positions are below:

 

Position Shares Purchase Price Purchase Date
RWX 70 40.74 10/31/2012
EFA 49 58.98 1/31/2013
VTI 36 78.24 2/28/2013
VNQ 40 69.09 2/28/2013

 

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