Strategy: The Top 4 World Country Investment Strategy

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This topic contains 31 replies, has 13 voices, and was last updated by  Mark Faust 1 year, 6 months ago.

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  • #23688

    Vangelis
    Keymaster

    This is the forum for the Top 4 World Country Investment Strategy.

    #24750

    Nelson Brady
    Participant

    While I like the idea of this strategy it seems impractical for me at least. Though I have not tried it yet since I just learned of it, I suspect some issues with volume. For example for June it calls for 50% EIS. The average daily volume is 44000. If I just go with a half position it still would have me buying 6% of the average volume. I suspect many of the other countries are even worse. Is this mitigated by buying over several days for buying and selling?

    For June no TMF needed?

    When will this be added to the custom portfolio builder?

    #24804

    Vangelis
    Keymaster

    Nelson,
    Some of the ETFs do have low liquidity; most are fine. We have tested this without using the lower liquidity ETFs and the results are pretty close; we are intending to give guidance on swap outs in any month when a low liquidity ETF comes up. Being patient with limit orders, as you implied, is necessary for any ETF that has more much than a couple of pennies spread on the bid/ask.

    We will be adding this to the custom builder; will update everyone on timing.

    The current signal is up to date in the strategy section.

    Kind Regards,
    Scott

    #25030

    rikder
    Participant

    Maybe I am looking at something wrong, but the numbers from 2012 and earlier on the table of trades don’t match up with the bar chart and stats in your article. Which numbers are correct?

    #25031

    rikder
    Participant

    More specifically, your bar chart at the top right corner of the page uses cumulative return numbers for 2010 – 2012 instead of annual return numbers. Were the wrong numbers also used for other calculations? Thanks.

    #25045

    Vangelis
    Keymaster

    Thank you Derrick. This was a copy/paste mistake. It has been corrected.

    #25738

    rikder
    Participant

    I am curious how you came up with a 68 (or 66?) day look back period? How do different look back periods affect the results? I would be interested in seeing the stats on different look back periods you tested just to get a feel for the robustness of this strategy. Also, how does the strategy do using only the largest volume funds, say the top 20 or so? Thanks.

    #25845

    Vangelis
    Keymaster

    Derrick,

    We look at stable results over different time periods for the settings, seeking forecastable plateaus rather than peaks. Generally small performance differences with moderate changes in lookback; radically different values produce strong differences but still generally positive outcomes. Strategy holds up well with small performance decreases with high liquidity ETFs.

    #27132

    Sunil Bhatia
    Participant

    Hi Guys,

    Can you please make this strategy available in the Custom Portfolio Builder?

    Thanks

    #27857

    Michael Cave
    Participant

    How could you implement this strategy without using the 3x leveraged ETF TMF? Our 401K doesn’t allow leveraged ETFs.

    #27861

    Vangelis
    Keymaster

    Michael,
    TLT with 3 times the capital allocation would do about what TMF does.

    #27885

    xmonika
    Participant

    Nice work, thank you for sharing. Could you be more specific on the allocation algorithm? Is the percentual split between top 4 ETF based on sharpe, performance or something more sofisticated? Or even trying all the possible combinations like US-TLT adaptive algorithm? Is there big difference between i.e. simple fixed ranking? Thanks

    #34055

    Sunil Bhatia
    Participant

    Frank & Team

    This strategy was rolled out a year ago with the promise that this will do well, when the US equity market stalls. Well the US equity market did stall and delivered only 1.5% over the 12 months since the strategy was rolled out.

    The Chart of this strategy for the last 1 year looks very similar to SPY (the benchmark) with much higher volatility despite the fact that TMF hedge was used. I suspect the correlation to SPY is larger than 0.6 or so for the last 12 months.

    The return for the past 12 months seems to be a loss of 1.5% at a time when the SPY has made a positive return of 2%.

    What went wrong?

    Are you planning any tweaks? Or is this strategy designed to do well only in a strong US equity bull market?

    #34065

    Vangelis
    Keymaster

    Hello Sunil,
    Good question.
    The world Top 4 strategy is meant as a growth, non-U.S. strategy and diversifier. It is far more correlated to foreign developed and emerging equity indexes than U.S. equity. Foreign markets can grow significantly in the right environment. Last year was not such. If you have invested ‘naked’ in foreign equity markets in the past year, you would have been crashed. Remember, oil did touch below $30 and this influences many commodity producing foreign countries like Canada, Russia, Australia, etc. WT4 offered exposure to foreign counties while protecting from extreme losses by hedging with TMV (Treasuries),
    To answer your question: What went wrong. The U.S. dollar rallied causing foreign markets as well as commodities to under-perform. If you believe this will continue you should not invest in WT4 but choose something more U.S. based, like UIS or the Nasdaq 100. But if you believe that commodity producing countries and foreign currencies will eventually outperform, then WT4 may be a good choice and a partial portfolio allocation could help diversify out of the U.S. dollar.

    #35631

    James Vitale
    Participant

    Hi Vangelis

    Is there a list ranking the top ETFs each month? The low volume on some of these is just to low for me and I’d like to move down to the next country ETF with more volume.

    Many thanks
    Jimmy V

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