Dear Subscribers and followers, It all started on the beautiful Greek island of Hydra where Frank, Vangelis and Alex met for the Logical Invest partner meeting in May 2018. Our objective was to define Logical Invest's strategic priorities along with the concrete steps to accomplish them. Here is what we came up with: Priority 1: Become the “partner of choice” for both retail and institutional investors Make QuantTrader the engine that drives our online offerings as well as our strategy design and operations Launch our next generation web application that merges the capabilities of our various tools into an integrated application built on a sustainable and scaleable platform Build community collaboration features so users can build, share and improve QuantTrader investment strategies and portfolios with the help of fellow investors Priority 2: Broaden our retail customer base Provide "point and click" investment options for investors looking for simple solutions Provide easy to use tools for advanced investors to create custom portfolios that meet their unique investment goals Provide better documentation and educational support to our users Priority 3: Expand our offerings for institutional investors and money managers Strive for GIPS certification of our strategies Partner with US based registered investment advisers to offer money management products Explore non-US based money management offerings including managed accounts and open investment funds “Wow, not bad for a week” we thought, but also quickly realized that to accomplish our goals we needed to expand our team with a technology veteran, while keeping the spirit of who we are. We did just that with the addition of Patrick Hill, who joined the partnership in August 2018. Pat has held software engineering and management positions at companies such as IBM, Dell and HP as well as several start-up companies. He is a graduate of the [...]
Continuing our effort to provide training and education for new users of our QuantTrader Software, here a new series of video tutorials. A complete walk-through of the main functionalities for building a Meta-Strategy Here the framework of the Hedged Dow Jones Meta-Strategy created during the process, and the detailed agenda of the 9 video clips: QuantTrader "under the hood" - Explained with practical examples In section 3.4 Setting up Strategy Algorithms and Parameters we explain the calculation of the "modified Sharpe Ratio", how to properly select the volatility attenuator and show the differences between the six ranking and allocation algorithms: Tutorial videos in detail: The videos are available as a YouTube Playlist, so you can follow the overall process or chose topics of your interest. The tutorial is targeted to first-time and beginning QuantTrader users, with detailed explanation on each single step so you can replicate the process while watching. Further tutorials for our more advanced QuantTrader users are in preparation. Tutorial Intro: Objective, Framework and Agenda https://www.youtube.com/watch?v=tLyGbUeUuxQ 1. Starting QuantTrader & loading data https://www.youtube.com/watch?v=IMTeuFno-3o 2. Setting up symbols and stock-lists https://www.youtube.com/watch?v=dATEQ2x-280 3.1 & 3.2 Using Portfolio Manager to create and configure the "Dow Jones" strategy https://www.youtube.com/watch?v=eySTp6BIrF0 3.3 Interpreting the Strategy Backtest Window https://www.youtube.com/watch?v=hbK8w1y8Cus 3.4 Setting up Strategy Algorithms and Parameters https://www.youtube.com/watch?v=bG7XGrfYXPE 3.5 Optimizing Strategy Parameters https://www.youtube.com/watch?v=hYIac2PoD2Y 4. Using Portfolio Manager to create and configure the "Hedge" strategy https://www.youtube.com/watch?v=hxVw3M4ILLM 5. Creating the final "Dow Hedged" Meta-Strategy https://www.youtube.com/watch?v=OTBEUX9Uwug Please post follow-up questions or doubts either in the comment section of this post, or in the comment section of the YouTube videos. I plan to prepare another video answering the main questions. If you have not yet subscribed to QuantTrader, you can do so from here, read more about its powerful features, or give it a try with our free, no-strings-attached 30 days trial. [...]
As promised, please find below some short video tutorials on how to create consolidated signals for your portfolio in the Online Portfolio Builder and QuantTrader, and how to efficiently execute the trades using the Portfolio Rebalance Tool from Interactive Brokers. One of the biggest concern raised after we announced QuantTrader Light for all our "All Strategies" subscribers was the abitility to create, backtest and save custom fixed-weight portfolios. Frank just published QuantTrader Version 510, which comes with just that functionality, in the tutorial I still announce this as pre-release, but you can now use this functionality live in January rebalancing. If you are not yet a Logical Invest subscriber, you can use our 30 days free no strings attached QuantTrader trial. You can open a free trial demo account at Interactive Brokers to test the portfolio rebalance functionality. If you already have an IB account you can create a paper account for testing and enhancing your execution skills. And to repeat, we´re in no way afiliated with them, but do appreciate the cost structure and functionalities for trading our own accounts. We will be adding more tutorials about individual features of QuantTrader and how to build and execute your portfolio. For the time being please let us know which features you´re most interested in, and if there are questions in regard of these first tutorials. Consolidated Signals in Portfolio Builder See here: https://youtu.be/yZ2sgWAfQLk Consolidated Signals in QuantTrader See here: https://youtu.be/AZjlrEv-yLQ Configuring the Interactive Brokers Portfolio Rebalance Tool See here: https://youtu.be/GB4vCP1_d-c Executing Monthly Rebalance with the Interactive Brokers Portfolio Rebalance Tool See here: https://youtu.be/YAMeSeh0WbY As always in anticipation of a vivid discussion in the comments or the QuantTrader Forum. All the best, Alexander
First of January 2018 after a fabulous year in the markets and hopefully also your account. What better time than to spend some hours on revisiting our portfolio allocation to be ready for whatever the new year will bring? As stated previously we update and re-optimize our fixed-weight portfolios in the Portfolio Builder about twice a year. To recap, why do we re-optimize portfolios periodically? Modern Portfolio Theory by Harry Markowitz uses past returns and covariances to construct portfolios which optimize the expected return and variance. While fundamental MPT aficionados would advise to stick to your allocation for several years, at Logical Invest we advocate for a more flexible approach with regular reviews which in our view ensure your portfolio allocation considers also recent market developments. 2017 has been marked by steadily increasing equities while subdued volatility is taking historical levels. SPY, our proxy for the S&P 500 has returned 21.7% while TLT, proxy for the 20+ year bond market has returned 9.2% . The “fear index” VIX, representing S&P 500 volatility, has seen readings in the lower tens most of the year, a historical low of 8.84 and only four spikes above 15, which is the 10 years average. How have our individual strategies performed so far? The strong run in equities coupled with low volatility has provided clear medium-term trends and therefore runs to our high-performing strategies. For example, the Maximum Yield strategy returned close to 65%, this thanks to being in average two thirds invested into ZIV, which alone represents around 48.0% of this return. How has this translated into our Markowitz optimized Portfolios? 2017 has been a mixed picture for the pre-configured portfolios. As some strategies like the Maximum Yield and 3x Universal Investment performed well at or above the historical levels, others performed below [...]
Well, we had this on our list for 2017 (evidence here thanks to Marcin!), so even if now only a couple of hours remain for our European followers, and we definitely failed our readers for Asia, we’re to our standards perfectly on time for our subscribers from North and South America: QuantTrader with most functionalities will now be available for our “All-Strategies” subscribers at no additional cost! Thanks to your continuous input and feedback we’ve built a special edition of QuantTrader to enable you to: Generate signals on your preferred day so you’re not bound to the firm monthly cycle and do not have to wait for our signal emails. We still advocate to keep a monthly cycle, e.g. trading at or around the month-end, but with QuantTrader you can now find your own rhythm and cycle to trade either before, on or after the month-end, or even change your trading day when you are for example on business travel or holidays. Cut signals intraday before close to trade at close. This probably is one of the main critique points during 2017: Why do signal subscribers have to delay trading into next opening, while performance of our strategies is calculated at the month-end close. Well, we still believe this is not a killing argument based on our research, but we do understand the psychological importance of trading at close of the month-end, especially when it’s about going relaxed into the weekend. Get the consolidated signals for your preferred portfolio, that is, a blend of different strategies. This is very much as in our Online Portfolio Builder and Consolidated signals, but now you can also save your preferred portfolio allocation, something we were not able to deliver so far in the online version. More on this functionality with practical steps [...]
En este artículo quiero explicar cómo funciona nuestra Estrategia de Rotación de Máximo Rendimiento "Maximum Yield Rotation Strategy". Esta estrategia logra muy altos retornos por invertir en fondos de volatilidad inversa. Desde 2011 hasta hoy el rendimiento anual fue de más del 55% por año. Durante el año presente el rendimiento acumulado es del 27%. El ratio de Sharpe (una estimación del retorno por unidad de riesgo) de 2,1 es un "valor sueño" y dudo que alguien puede mostrar una estrategia con una mayor proporción. La estrategia invierte en 4 ETF diferentes: Mercado de acciones de Estados Unidos Bonos del Tesoro Volatilidad Inversa Equivalente a Efectivo
Diversification is a cornerstone to successful investing. In simple form, when measurably diverse assets are combined in a portfolio, the investors portfolio risks are reduced without any sacrifice of returns. This is a rare “free lunch”, it is well accepted part of modern financial portfolios, and to stay financially healthy it is important not to skip lunch. When one asset is going down while the other is going up, the portfolios risk is reduced without the normal penalty of risk/return trade-offs. We take advantage of that when our systems dynamically blend things like the S&P 500 and treasury bonds, which often exhibit negative correlation to each other (which is ideal). Applying Portfolio Diversification to Strategies: Our subscribers can take this take a step further. Our investing algorithms take on a blend of the properties of their underlying assets combined with the “alpha” edges from the investing rules. The returns of each investing strategy should be thought of as an asset, which are different and unique from the underlying holdings. So holding a portfolio of strategies functions much like holding a portfolio of assets. To evaluate the risk profile of the strategy, we examine the history of the returns of those strategies, much like when holding a basket of stocks the historical returns of each stock would be evaluated.
From individual Strategies to Portfolio Optimization Based on the interest of our followers and our own investment philosophy, we have gradually evolved from offering single quantitative strategies towards blends or portfolios of strategies. The way we visualize our own development cycle might be best summarized in a chart: Where are we on this path and where are we heading? We believe we have now a stable set of 'core-strategies', which cover a broad spectrum of both risk/performance but also trading and hedging instruments. We will continue our research on new strategies, and will also in future come up with smart ideas in that area. However, we are currently increasing our effort in blending these strategies into portfolio solutions. The "Portfolio Builder" with fixed-weight allocations is here only the first step. Developing a dynamic Strategies of Strategies (or Meta-Strategies) which smartly allocate with changing weights among a set of our strategies is one of the projects we initiated since the four of us met in mid 2014. Our thought: Quickly reacting to or even anticipating changes in the market environment by changing horses on the fly, better dealing with changing correlations of markets and constantly challenging whether one of our strategies has lost ‘steam power’ should be even better than simply allocating funds with fixed weights or even worse discretionary among strategies. To continue the enhancement of our tools towards this vision, we’ve given our fixed-weight Portfolio Builder a major overhaul and implemented many of the requested features. Key features for portfolio optimization Some of the new key features for portfolio optimization are: Equity lines according to most recent strategy review Our subscribers know that we review our strategies periodically, either because we find improvements for the execution (change of IEV to FEZ in the Global Market Rotation), or introduce newly developed [...]
UPDATE: The tool is now available following this link “What? Another post about tools and infrastructure? Thought Logical Invest is going to show me the next 21st Century ETF Investment Strategy!” Yes, I know there have been plenty of posts regarding new features on our site, new portfolio options, new charting capabilities, and new portfolio builder features. Plus plenty of teasers of what is coming up in regard of strategies and meta-strategies. Is the Logical Invest team now only busy on this nice-to-have-but-not-money-making stuff? No, we’re not, our purpose and motivation has not changed! We’re determined to be your first choice for your smart investments! But based on your feedback, and seeing that more and more of you migrate from employing single-strategies towards blends and full-fletched portfolios of strategies, we know we need to develop our infrastructure to keep up with our pledge: “A few simple switches a month, which can be done in 15 minutes” We’ve given an insight into our long-term vision in our last (yes, silent) video, which is: Single Strategies for complementing your existing portfolio, or Full fixed-weight blends or portfolios of our strategies (Portfolio Builder), or Dynamic and smart meta-strategies which adapt to changes in market environment and strategy performance – Breaking through the traditional (more or less) efficient frontiers, or Top-notch custom portfolio solutions made to spec for larger accounts and institutional money managers. Now, while this means a time-warp evolution in performance and robustness, it undoubtable also means an increase in the complexity. Means, we need to provide you with tools to keep the execution process easy, and allow you to enjoy your free-time with your most beloved instead of doing advanced Excel Acrobatics on weekends. “Ok, got you. But where does this lead us?” [...]
Summary: -Aggressive leveraged version of our previously published Universal Investment Strategy -Variable SPY-TLT allocations dynamically adapted to the market conditions. -45% annual return with a Sharpe Ratio of 1.3 since 2002. Due to its simplicity and low correlation to the S&P 500, there is a continued interest in the UIS version that uses 3x leveraged ETFs: ETF SPXL (Direxion Daily S&P 500 Bull 3X Shares ETF) and TMF (Direxion Daily 30-Year Treasury Bull 3x Shares ETF). Following the suggested nomenclature by Al from AAII SV - and to honor their interest, we call this version “Hell on fire”, which alludes to the high risk/return profile of the strategy. We will show ways to blend this strategy in a well-balanced and risk-optimized portfolio as to overcome the generally negative perception of private investors towards leveraged ETF.