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 [...]
In the past 20 years I traded nearly everything you can trade, including commodities. Since about 10 years, I have gone from purely emotional trading to systematical rule-based trading. Today, I don't trade anything anymore, if I cannot reproduce a positive backtest of my trading strategies. Today I stopped trading commodities, because it is very difficult to get good results with backtested strategies. My core investment strategy is the "Global Market Rotation Strategy", which I presented in my first Seeking Alpha contribution. This is a very good and safe strategy and also this year the return is already 28.4%. The only commodity I trade at the time is Silver. With Silver it is different. There is no way to include silver in a successful rotation strategy. Silver is much too volatile and it is much too easy for big investors or banks to influence the price. However, one thing I still think I understand is the value of something. I do not like value investing with shares, because shares can go to 0. With commodities it is different. Today you can buy silver for $22/ounce and we know that production costs are between $25-$30. Even if there is no shortage of silver at the moment, I think for a longer term investment silver is extremely interesting. No commodity ever remained for long time below production cost. With such a constellation the downside risk of the silver price is much smaller than the possibility of higher prices. The other interesting argument for a silver investment is, that silver is extremely cheap to buy. I am using a broker (Saxo-Bank) in Switzerland which allows you to trade silver like a Forex currency. I can buy nearly every amount of silver with extremely tight spreads and no initial margin is required. With [...]
In this post I will share a quick way for Amibroker users to update quotes using split and dividend back adjusted data from a fairly new provider, Tiingo.com. Although we do run our investment strategies on our very own QuantTrader, we use various other tools to analyse markets, including Amibroker. The problem: Where to download dividend adjusted data Many Amibroker users build strategies that rely on dividend adjusted historical data. At this moment it is difficult to find similar data since Yahoo, as well as many other sources, do not back-adjust prices to include dividends. A solution is to use free (or rather donation-based) EOD data from Tiingo.com. What happened to the free Yahoo finance historical data? Yahoo! finance has changed their Yahoo Finance API and the way the data is delivered. This has disrupted the workflow of many self-directed investors that use Excel or Google sheets to track their holdings. It has also created problems for users of financial software that use Yahoo's service. The service has not been discontinued. Rather, it has been changed. You can still retrieve stock, ETF, mutual funds and currency historical data. From what we can see so far, the data is in json format, adjusted for splits but not for dividends, although the dividend information is provided in the data and can be retrieved (as of 6/3/2017). If you use Amibroker, you can use the updated Amiquote to retrieve data using the new Yahoo API. It will not be dividend-adjusted (just try to download a bond ETF like "TLT"). If you want to continue an existing workflow of dividend-adjusted data, you can try this solution. You will need: Amibroker. A free account at Tiingo.com to get a Token # A way to run the following Python script. Tingo API docs for daily prices: https://api.tiingo.com/docs/tiingo/daily [...]
The last few months have been exciting here at Logical Invest, and if you have missed some of it, let me catch you up what we´ve been doing to deliver the best ETF Investment Strategies: In November we expanded our partnership and added website tools and services. Our strategies had an excellent 2014, reviewed here. While the overall market had a rough January, we guided our subscribers towards making nearly +5% in just January, and every of our ETF Investment Strategies was up! We added new ETF Investment Strategies: the Bug, which provides an excellent non-correlated alpha, and the Universal Investment Strategy, using an approach that has done well for 20 years. We showed here how blending together strategies can dramatically lower your risks. Good discussions, examples and the tool. We love this stuff too much to take a break, so in the coming months you will see improved tools and new strategy capabilities: We are expanding the capabilities of customizing your portfolio of strategies and tracking the signals and results. A meta-strategy will be available that provides a model overlay using performance, volatility and cross correlations to dynamically allocate between ETF Strategies. Selected new ETF Investment Strategies will serve investor & traders different objectives. Thanks again for supporting our research, tool developments, and participating in the forums. Keep telling us how we are doing.
We make it as easy as possible to analyze our ETF Rotation Investment strategies, how they perform in bull markets, bear markets, and any time period you want. How did they do vs a benchmark? What were the model signals? How are the ETF Rotation Investment strategies doing lately? We don't make you subscribe to get this information, we make it publicly available. Our new charts are now more sophisticated and updated everyday (currently with a one day lag to allow data validation). You can view these by going to strategy page and picking a strategy, like the Bond Rotation “Sleep Well”. Or check the Maximum Yield Strategy, or the NASDAQ100. Improved tracking of ETF Rotation Investment Strategies We have a lot of features; today I will show you a few: We now have a better way to view performance by year vs benchmark. Analytically, I think this is much more insightful than the typical 3 year, 5 year, etc. aggregated look back. Next, you can see how you can use the preset button on the right or directly enter date ranges on the left to view any period you want. For example here is the longer history view: Here is the one year view for a ETF Rotation Investment strategy: And the close in Year to date period: And, by using click into the graph the cross hairs show you each individual day, which is pretty cool: We have added nice features, but I must save some fun for the next post. You can always track our ETF Rotation Investment strategies either on the home page, on the individual strategy pages, or in the "My account" section. Either way, we´ll put the strategy performance on top of all, finally this is why you are here, and so do we. Enjoy, Alex
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?” [...]
By request of several followers, we have now included the version with 3x leverage of the Universal Investment Strategy using synthetic SPXL and TMF data from 2002. Portfolio Builder now with leverage We're about to publish a full article on this exciting option for this weekend, but want to pre-alert you about this upcoming adition. While this is a very aggressive strategy with leverage, it blends very nicely with a 10%-20% allocation into a portfolio targeting Maximum annual return with a 10% or 20% volatility constraint. We have therefore also updated the optimized portfolios, and by another request included the MaxCAGR with volatility constraint of 20% and 25% volatility. Here a preview of the full backtest since 2002 of the version with leverage A visualization of the new portfolio options with blends of this strategy with leverage: And the timeseries of the synthetically constructed SPXL and TMF /3x leverage) since 2002 (both ETF have an inception date in 2009). We will explain the methodology of this more in detail in the upcoming post. Stay tuned for our next post, but review the portfolio options in our Portfolio Builder before, which now includes the version with leverage. A team of followers and us is working on an advanced offline Portfolio Builder, which offers additional features to optimize and customize your portfolios, as well as full daily return and equity data. This is still in development, but feel free to preview and join the team if interested. If you are new to our site, here an overview of our Universal Investment strategy: "The SPY-TLT Universal Investment Strategy (UIS) is one of our new core investment strategies. Probably the most basic of all rotation strategies, is the switching strategy between the S&P 500 US stock market (SPY) and long duration Treasuries (TLT). The [...]
What an audience and what an experience! Thanks to the investors AAII Silicon Valley! As announced some weeks ago, on April 11 we hosted our first conference at the Silicon Valley chapter of the American Association of Individual Investors AAII in San Jose, CA. Sharing and discussing some of the topics which are close to our heart with an incredible audience in live mode was such a great opportunity we completely overran the anticipated schedule by more than an hour. Deep-diving into special interests during follow up face-to-face meetings with individual investors and getting challenged by the computerized investment group helped to clarify expectations and ideas for further developments. Recorded investors AAII conference 1.) AAII Board Introduction Opening remarks by Lynn Gillette, President of the AAII SV, and Al Zmyslowski, head of the computerized investment group. 2) Who we are & What we stand for Introduction of the Logical Invest team, what drives us, and some of our core beliefs in investing 3) Constructing your ‘all weather’ self-managed portfolio The Logical Invest way of constructing portfolios using smart building blocks of assets, diversifiers, and different tactical approaches at the strategy and portfolio level 4) Building a well-balanced crash protection Why Buy & Hold is dead and how to set up your portfolio for success even in the next correction 5) Harvesting the ‘Fear Premium’ and 'Rebalancing losses' Highly geeky ways to further improve your portfolio returns by investing in inverse volatility and shorting 3 times leveraged bear treasury ETF. 6) Markowitz Meets Logical Invest How our own approach to portfolio construction evolved over time, and how to build dynamic weighted Meta-Strategies (aka Strategy of Strategies) Or see the full investors AAII Youtube playlist list online. [...]
For our „All Strategies“ Subscriber who use the Portfolio Builder to blend their own mix of Logical Invest Strategies, here some updates and a short mid-year review:We have now included the “World Top 4 Strategy” into both the online an offline tool. To keep the charts readable, we opted for replacing the Aggressive Version of our “Global Sector Rotation”. The preconfigured and optimized Markowitz Portfolios have been updated, only slight changes in the allocations occurred – all are <5%, so in most cases these can be neglected due to account size.