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Inversion en ETF Estrategia de rotación de mercados mundiales: 36.7% anual desde 2003

La siguiente estrategia es una de nuestros favoritos, que muchos de nuestros amigos, clientes y nosotros mismos hemos utilizado ya por algunos años. La Estrategia de Rotación de Mercados Globales (“Global Market Rotation Strategy”, GMR) La Estrategia GMR rota mensualmente entre 6 ETF diferentes. El rendimiento histórico calculado de esta estrategia desde 2003 es bastante impresionante. Rendimiento anual (CAGR) = 36.7% (S&P 500 = 8,4%) Rendimiento total a partir de 2003 = 3924% (S&P 500 = 134%) 69% de las operaciones mensuales tienen una rentabilidad positivaLos mercados globales utilizados y ETF correspondientes son: Estados Unidos Europa Mercados emergentes América Latina Región del Pacífico

2017-02-20T12:45:24+00:00 By |0 Comments

A new enhanced Global Market Rotation Strategy with adaptive ETF investment allocation

Update: See the current performance of this ETF investment strategy here. A new enhanced Global Market Rotation Strategy with adaptive ETF investment allocation The GMR strategy performed well during the last 10 years. Especially during years with a strong trend in one of the 5 world markets, this strategy was able to switch early to the best ETF and stay invested until another market ETF took the lead. A known problem for such monthly rotation strategies have been years like 2014 with no clear trend in the markets. During 2014, conflicts like Syria or Ukraine or the fear that the US market may have culminated and is ready for a correction, made investors switch several times in “risk off” mode which favors safe haven assets like our long term EDV or TLT Treasury. The bad thing was, that shortly after they switched back to “risk on” mode favoring our stock market ETFs. Such a whipsaw market is bad for “switching” rotation strategies and as a result, our GMRS strategy shows a negative return for 2014. The strategy had two big monthly losses, both with foreign market ETF investment and both times because of a soaring dollar after a FED statement. In fact most of the times a full switch from a stock market ETF investment to a treasury ETF is not the best strategy. Better is to keep both stock market and Treasury ETF investment and change the allocation gradually. In January I proposed to invest 20% in a short TMV Treasury hedge which is about equal to a nearly 50% TLT hedge. This was a first approach to tell you that in such years it is better to invest in both, stock market and Treasury ETF investment. This hedge has performed extremely well in 2014. TMV is 46% up and [...]

2017-03-14T22:11:11+00:00 By |0 Comments

Logical Invest Strategy Performance for 2014

Dear investors, In general 2014 was quite a difficult year for investors, so we want to summarize and comment our strategy performance. Apart of the US market, all global markets finished the year with negative performances. SPY 13.46% (S&P 500 US market) FEZ -9.75% (Euro Stoxx 50) EEM -3.89% (MSCI Emerging Markets) EPP -1.92% (MSCI Pacific ex-Japan) ILF -12,29% (S&P Latin America) AGG 5.99% (Core Total US Bond (5-6yr)) Our Strategy Performance See here for a most recent Strategy Performance overview. However, most of the negative performance of these foreign market ETFs is due to the strong US$. The Euro lost 12% on the US$ and the US$ index UUP is 10% higher.  In fact, the USD/EUR hedged DBEU (MSCI Europe) ETF had a +4% performance, which is nearly 15% better than the USD denominated FEZ.  It is very difficult to forecast the influence of exchange rates on our strategies.  All this is driven by the Yellen and Draghi, but longer term, a strong US$ will make European and Asian markets more competitive.  So, we will probably see a rotation away from the US market to some foreign markets at some point. In spite of the global weakness and currency dislocations, the rotation strategy performance came through flat to up nicely for the year, and all had a strong year with hedging.  We had 5 intermediate short market corrections, which typically had a 2 week pullback of up to 10% and then a very fast recovery.  This sort of whipsaw market is not ideal for our rotation strategies.  At least for the old style of rotation strategies which always switched 100% between stock market ETFs and treasuries.  2014 was also a very strong year for treasuries, which again proved all analyst forecasts wrong. The 20% treasury hedge which I promoted since February 2014 had a very positive [...]

2017-02-19T20:35:36+00:00 By |7 Comments

Volatility Premium – Why we invest in ZIV and not in XIV

Several times I have been asked why we invest in ZIV (inverse mid-term volatility) and not in XIV (inverse front month volatility) in our Maximum Yield Rotation Strategy and in the "Global Market Rotation Enhanced Strategy" to harvest the volatility premium. Harvest Volatility Premium smartly After all, front month VIX Future contango is about 2-3x bigger then medium term contango. At the moment XIV profits from nearly 9% monthly VIX Futures contango. ZIV profits from about 3% monthly VIX Futures contango, or volatility premium Normally you would think that XIV should have a far better performance than ZIV, but now look at this chart of the 1 year performance. ZIV has performed very well. With 64% annual performance it performs nearly 4% better than XIV and this with much less volatility - thus allows better to harvest the volatility premium. The main problem is that both of the ETFs are inverse ETFs. This means that underlying they are constructed by shorting VIX futures. These ETFs are rebalanced every day and this results in a quite big time decay. XIV has a very high volatility of about 55% compared to only 25% for ZIV. Higher volatility means also bigger time decay losses. The 25% volatility of ZIV fits very well to the volatilities of our global market ETFs (MDY, FEZ, EEM, EPP, ILF). Rotation strategies work better, if the ETFs have more or less the same volatility. Rotation Strategy backtests - all to benefit from volatility premium If I backtest our Maximum Yield Rotation Strategy with XIV instead of ZIV, then I only get an annual performance of 31% with a volatility of 48% since 2011. With ZIV, I get 70% annual performance with only 27% volatility. This is a huge difference, which shows you, how important it is, that the ETFs [...]

2017-04-28T16:13:00+00:00 By |2 Comments

A Global Market Rotation Strategy with an annual performance of 41.4% since 2003

The following ETF strategy is one of my favorite rotation strategies, which many of my friends, customers and I use now for some years. The Global Market ETF Rotation Strategy (GMR) The GMR Strategy switches between 6 different ETF on a monthly basis. The back tested return of this strategy since 2003 is quite impressive. Annual performance (CAGR) = 41.4% (S&P500=8.4%) Total performance since 2003 = 3740% (S&P500=134%) 69% of trades have positive return versus 31% with negative return You find the most recent performance table here. ETF These global markets and ETF are: US Market (MDY - S&P MidCap 400 SPDRs) Europe (IEV - iShares S&P Europe 350 Index Fund) Emerging Markets (EEM - iShares MSCI Emerging Markets) Latin America (ILF - iShares S&P Latin America) Pacific region (EPP - iShares MSCI Pacific ex-Japan) During market corrections I invest in: US Treasury Bonds (EDV - Vanguard Extended Duration Treasuries (25+yr)) Cash or SHY (SHY - Barclays Low Duration US Treasury) Selection of the strategy ETF For the design of a well performing rotation strategy, it is important that the selected ETF are not too volatile, show longer term visible trends and have a good market volume, so that they cannot be manipulated. They all should have more or less the same volatility. The 5 global markets ETF fulfill this condition. They all are capitalized enough, so that they cannot be manipulated in the short term. Why rotating? The 5 ETFs follow slightly different economic cycles and there are long periods where one market outperforms the other until it becomes so overpriced and investors begin to remove their money from that market in order to invest in other cheaper valued markets. Looking back 12 month, we see that the US market was the clear winner and the [...]

2017-04-28T16:09:53+00:00 By |7 Comments