[dwedel812]

Now that BRS top 1 is the bond hedge for both World top 4 and Global sector it seems to overweight bonds if you are holding these strategies. For example,
A portfolio consisting of:

BRS, 10%
World top 4, 20%
Global sector rotation, 20%
Max Yield, 25%
Nasdaq 100, 25%

This custom portfolio has a current allocation for december of 32% in JNK. It would be interesting to see how World top 4 and Global sector perform in a backtest without the BRS bond hedge. Instead using up to 50% allocation in a couple of 1X Short etfs and/or just TLT.

Also notably missing from the asset classes is biotech. Ishares has about 50 sector etfs. I think some of the sectors in the asset class list are more industry specific like KOL, MOO, CUT etc and some are more broad sectors such as the Ishares series which is not necessarily a bad idea to mix. But given the industry specific etf are more volatile they might be treated differently by selecting the top 2 sectors and top 2 industry specific etfs for a total of 4 holdings.

[dwedel812]

Followup from my above post:

Since the strategy now uses the BRS top holding as the hedge instead of TMF this is clearly an improvement …however it comes with an unexpected consequence -> lower diversification when combined with other strategies. For example: a portfolio consisting of:

BRS, 10%
World top 4, 20%
Global sector rotation, 20%
Max Yield, 25%
Nasdaq 100, 25%

This custom portfolio has a current allocation of 32% for december in JNK …this is due to the multiple strategies using BRS. This is a problem. When bonds are hot they will dominate the strategies using BRS for protection.

I’m not certain how best to fix this but one idea is remove BRS all together from World top 4 but add short Emerging markets (EUM), and short S&P (SH) as strategy asset classes to help with corrections with a max allocation on the short etfs of say 50%.

[dwedel812]

If the purpose of this strategy is growth with diversification then why not remove the US based etfs from the model (QQQ and SPY) ..I don’t want to be adding more exposure to US markets when other models are already invested.

Secondly the TMF allocation might be dominating the trajectory at times. For market corrections may want to add short Emerging markets (EUM), and short S&P (SH).

Lastly, the etf selection on this model might lend better results with a shorter timeframe…shifting more weight to the 3 month performance. Case in point: RSX is not a holding at this time–is this because of mean reversion? or too long a timeframe used by the strategy?

[dwedel812]

Have you considered backtesting using the 1x short Nasdaq etf and/or straight TLT as additional possible hedges?…model to choose only 1. I think the 3x treasury could sometimes washout gains and/or dominate the trajectory. The short etf would likely juice up the returns in 2008 or market corrections more so than 3x tlt.

Same idea with other models add the short s&p 500 1x option.

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