Momentum Portfolio February Update

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 ranked the same basket of ETFs based solely on price momentum.  Both strategies have undergone minor revisions over the years but the key elements remain.

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The strategies in their current form begin by screening a  basket of these 10 ETFs:

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 in the “Conservative Momentum” system are still ranked by 6 month total returns (weighted 34%), 3 month total returns (weighted 33%), and 3 month price volatility (weighted 33%). The top 3 are purchased  at the beginning of each month and if a holding drops out of the top 3 at the next month’s rebalance it is replaced.

Pure Momentum System

The pure momentum system previously ranked  ETFs based solely on 6 month price momentum.  The strategy now ranks ETFs based on 5 month price momentum. There is no cash filter in the pure momentum system, volatility ranking, or requirement to limit turnover.  The portfolio and rankings are posted on the same spreadsheet as the Conservative Momentum strategy.

A free option for backtesting these strategies is available at Portfolio Visualizer.

The current top 3 ETFs are listed below, and for this month the only new position is EEM in the Pure Momentum system, replacing SHY:

 

Conservative Momentum
VTI Vanguard MSCI Total U.S. Stock Market
SHY iShares Barclays 1-3 Year Treasry Bnd Fd
EFA iShares MSCI EAFE
Pure Momentum
EEM iShares MSCI Emerging Markets
EFA iShares MSCI EAFE
VTI Vanguard MSCI Total U.S. Stock Market

 

The current portfolios are below:

Conservative Momentum

Position Shares Avg Purchase Price Purchase Date Cost Basis Current Value Percentage Gain/Loss Excluding Dividends
VTI 36 113.78 11/30/2016 $4,096.08 $4,228.20 3.23%
EFA 70 58.09 1/3/2017 $4,066.30 $4,190.90 3.06%
SHY 50 84.5 11/30/2016 $4,225.00 $4,223.00 -0.05%

 

Pure Momentum

Position Shares Purchase Price Purchase Date Cost Basis Current Value Percentage Gain/Loss Excluding Dividends
EFA 53 56.79 11/30/2016 $3,009.87 $3,173.11 5.42%
EEM 93 37.36 2/1/2017 $3,474.48 $3,474.48 0.00%
VTI 27 113.78 11/30/2016 $3,072.06 $3,171.15 3.23%

Ivy Portfolio February Update

The Ivy Portfolio spreadsheet track the 10 month moving average signals for two portfolios listed in Mebane Faber’s book The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets. Faber discusses 5, 10, and 20 security portfolios that have trading signals based on long-term moving averages.

The Ivy Portfolio spreadsheet on Scott’s Investments tracks both the 5 and 10 ETF Portfolios listed in Faber’s book. When a security is trading below its 10 month simple moving average, the position is listed as “Cash”. When the security is trading above its 10 month simple moving average the positions is listed as “Invested”.

The spreadsheet signals update once daily (typically in the late evening) using dividend/split adjusted closing price from Yahoo Finance. The 10 month simple moving average is based on the most recent 10 months including the current month’s most recent daily closing price.  Even though the signals update daily, it is not an endorsement to check signals daily or trade based on daily updates. It simply gives the spreadsheet more versatility for users to check at his or her convenience.

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The page also displays the percentage each ETF within the Ivy 10 and Ivy 5 Portfolio is above or below the current 10 month simple moving average, using both adjusted and unadjusted data. If an ETF has paid a dividend or split within the past 10 months, then when comparing the adjusted/unadjusted data you will see differences in the percent an ETF is above/below the 10 month SMA. This could also potentially impact whether an ETF is above or below its 10 month SMA. Regardless of whether you prefer the adjusted or unadjusted data, it is important to remain consistent in your approach. My preference is to use adjusted data when evaluating signals.

The current signals based on January’s adjusted closing prices are below.    This month Bond and Real Estate ETFs – BND, TIP, RWX, VNQ –  are below their  10 month moving average, which is the same as the previous two months.

The spreadsheet also provides quarterly, half year, and yearly return data courtesy of Finviz. The return data is useful for those interested in overlaying a momentum strategy with the 10 month SMA strategy:

 

I also provide a “Commission-Free” Ivy Portfolio spreadsheet as an added bonus. This document tracks the 10 month moving averages for four different portfolios designed for TD Ameritrade, Fidelity, Charles Schwab, and Vanguard commission-free ETF offers.

Not all ETFs in each portfolio are commission free, as each broker limits the selection of commission-free ETFs and viable ETFs may not exist in each asset class. Other restrictions and limitations may apply depending on each broker.

Below are the 10 month moving average signals (using adjusted price data) for the commission-free portfolios:

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