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Hello,
The white paper mentions having to occasionally rebalance while using this strategy. How often was the strategy rebalanced to obtain the back test results of UIS provided? Are subscribers informed of exactly when to rebalance? Also, could you please explain when and how to rebalance UIS while using short -3x ETF’s or 2x or 3x long ETF’s?
Thank you,
Mike
Dear Michael, thanks for your interest in the new strategy. The rebalancing of the strategy is each month-end, we will inform you shortly after the last close about the new allocation for the next month.
Assuming an allocation of 50% SPY (x)/ 50% TLT (y) in 1x ETF, the allocation using futures, leveraged or short ETF would look like this:
– x% ES E-mini S&P 500 Futures + y% UB Ultra U.S. Treasury Bond Futures (both CME Globex)
– x% SPXU (or SPXS) + -y% TMV (the minus % indicates a short position.)How would this new strategy fit with your other strategies in allocating all the asset in a portfolio?
Due to it’s conservative nature and the components SPY/TLT the UIS complements very nicely the other existing strategies. I’ve just added it to our ‘Custom Portfolio Builder’ so have a look there also.
Hello LI: with the UIS strategy have you seen conditions where both SPY and TLT are positively correlated and have decreasing values? How does the strategy adjust to that setup? Does it go to cash for both? Thanks, Greg
I’m confused on the differences in the annual returns shown for the UIS strategy (lowest annual return is 19% ! ) vs. the CAGR number of 14% and the 5 year CAGR (18%) shown in the white paper. I feel like i’m missing something very basic??
There are many short periods where TLT-SPY has positive correlation. If both go up then anyway we are happy. If both go down like 2013 for a short time, then it is not so good. If you analyze the correlation, then you see that it has it’s negative lows always if there is a market correction. So, in fact this means that if the market crashes investors sell SPY and go into the safe haven ETF TLT. As long as it is like this the strategy works. During low volatility calm bull markets, there is no problem if the correlation fluctuates sometimes towards zero.
Hi Frank,
Do you see a problem substituting 3x leverage etfs as replacements for Spy-Tlt in the UIS strategy if held within an IRA account ? Thanks.
Frank, just to clarify, I’m not referring to tax issues. It’s just I believe you mentioned leveraged etf’s were ok for margin accounts….wouldn’t they work alright in a Ira account as well ?
Hi,
Are you going to make the historical variable allocation ratios available on your website for the UIS and other strategies?
Thanks
Ruth,
Generally you can take long positions in leveraged ETFs in US IRAs, but you can’t short nor use margin in most IRA accounts.Russel, in the “Investment and Return tables” we are showing the “binary switches” until October 2014, and from there on the new adaptive switches. Reason being that this corresponds to how we updated the strategies in the monthly signals. For the UIS we’re going to show the full backtested history as published, just working on it, will be ready this evening.
I would have liked this stategy UIS back tested using spy/vustx as proxies. Vustx behaves like tlt but goes all the way back to 1990. This would help us see how it worked through the “other” great bear mkt.of the last decade and seen how your new “adaptive” hedging would have worked. The 90s l.t.treasuries had many pos. correlations periods with spy when spy was going down. for quite awhile.
Please consider further research for this strategy development especially to address.what to do when spy and its hedge are both losing money over an extended period.
Thank you in advanceI have just posted a short blog with a 20 year UIS backtest here: https://logical-invest.com/universal-investment-strategy-20-year-backtest/
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