October Update – ETFReplay.com Portfolio
The ETFReplay.com Portfolio holdings have been updated for October 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, the same as the previous three months. 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 9/30/15 are below:
6mo/3mo/3mo | |
SHY | Barclays Low Duration Treasury (2-yr) |
LQD | iShares iBoxx Invest Grade Bond |
TIP | iShares Barclays TIPS |
PCY | PowerShares Emerging Mkts Bond |
TLT | iShares Barclays Long-Term Trsry |
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 | |
SHY | Barclays Low Duration Treasury (2-yr) |
PCY | PowerShares Emerging Mkts Bond |
TIP | iShares Barclays TIPS |
LQD | iShares iBoxx Invest Grade Bond |
(TLT), a holding for one month, will be sold for a gain of 1.75%. The proceeds will be used to purchase (LQD).
The updated holdings for each portfolio are below.
6/3/3 strategy:
Position | Avg Purchase Price | Purchase Date | Cost Basis | Current Value | Percentage Gain/Loss Excluding Dividends |
SHY | 84.86 | 5/29/2015 & 6/30/15 | $12,644.14 | $12,663.51 | 0.15% |
Pure Momentum strategy:
Position | Purchase Price | Purchase Date | Cost Basis | Current Value | Percentage Gain/Loss Excluding Dividends |
PCY | 27.65 | 8/31/ 2015 | $2,350.25 | $2,331.55 | -0.80% |
SHY | 84.86 | 7/31/ 2015 | $2,460.94 | $2,464.71 | 0.15% |
TIP | 111.58 | 8/31/ 2015 | $2,343.18 | $2,324.49 | -0.80% |
LQD | 116.09 | 9/30/ 2015 | $2,321.80 | $2,321.80 | 0.00% |
Follow Scott’s Investments on Twitter: http://twitter.com/#!/scottsinvest
Source: http://www.scottsinvestments.com/2015/10/01/october-update-etfreplay-com-portfolio/
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