Logical Invest Investment Outlook March 2017 Our top 2017 strategies, year-to-date: The Maximum Yield strategy with 14.90% return. The Leveraged Universal strategy with 13.97% return. The NASDAQ 100 strategy with 11.28% return. SPY, the S&P500 ETF, returned 5.79%. News: Our in-depth 2-hour QUANTtrader webinar, with Frank Grossmann. Get a behind-the-scenes look at our strategies. We are testing a new U.S. Sector-based strategy that should be available in the coming months. Market comment: The S&P 500 is reaching new all time highs, currently at +10% from it's previous support in the summer of 2016. It is following a straight line with no major corrections since the U.S. elections. This type of movement makes investors nervous about a coming correction. Interestingly, looking at the VIX term-structure we see the following picture: VIX term structure February 28th 2017 This is highly unusual. Having near-month VIX contracts at very low prices is normal as the SP500 is breaking upwards. What is interesting is that far-out contracts are at extremely low levels as well, making the curve somewhat flatter than normal. This implies that market participants expect low levels of volatility in the future, even 9 months out. We will see how this plays out in the coming months. Our top 3 strategies are all U.S. market based and have achieved returns above 10% in just 2 months. Our Maximum Yield strategy, has returned an additional 4.1% in February, bringing year-to-date returns to 15%. Our 3x UIS strategy added 9% due to equity performance as well as a small upward reaction from oversold Treasuries. Our Nasdaq 100 added just 1.2% for the month. Of note is that the Nasdaq strategy has the lowest 60-day correlation to SPY, just 0.36, second only to our Gold-USD strategy's 0.18. Apart from our high flying strategies, it is worth mentioning and tracking our more defensive ones. Our Universal Investment Strategy [...]
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Our special topic this month are 401k Strategies Logical Invest Investment Outlook February 2017 Our top 2017 strategies: The Maximum Yield strategy with 10.29% return. The NASDAQ 100 strategy with 9.88% return. The Leveraged Universal strategy with 3.96% return. SPY, the S&P500 ETF, returned 1.79%. Market comment: 2017 started up as a different type of year. Not just in politics. Despite the unprecedented political uncertainty, volatility in the SP500 dived this month causing our volatility harvesting strategy, Maximum Yield, to return more than 10% in just one month. Our Nasdaq 100 strategy returned 9.88%. All other strategies were positive for January but with smaller gains of 1-3%. The only negative strategy for the month was the Gold-USD strategy at -2.06%. We would like to take this opportunity to thank two of our longer-term subscribers for their feedback, comments and support: Deshan, comment posted January 29, 2017: "Looking back at these comments from many months ago gave me a chuckle. Looked like the world was gonna end and the LI strategies were going down too. I feel badly for those that gave up. I stayed the course and am very happy customer." Read more.... Richard, author at Richard's Corner. "The universe of options for a conservative retiree who would like both some performance as well as low risk in a simple, stand-alone investment has proven difficult to find...". Read more... We wish you a healthy and prosperous 2017 and good performance in your 401k Strategies Investment. Logical Invest, February 1, 2017 Strategy performance overview: Logical Invest Performance January 2017 Visit our site for daily updated performance tables. Special topic 401k Strategies Do you know that our Backtest Software QuantTrader allows you to build your custom 401k Strategy in only a couple of minutes? Mix your plan sponsor assets into custom Strategies, see our recent High Performance Strategies webinar. Contact us to learn more. [...]
Special topic this month: 401k Investments Logical Invest Investment Outlook January 2017 Our top 2016 strategies: The Maximum Yield strategy with 29.92% return. The Leveraged Universal strategy with 22.33% return. The NASDAQ 100 strategy with 21.54% return. SPY, the S&P500 ETF, returned 12.00%. Market comment: To put 2016 in perspective, we must go back to 2015 and remind ourselves how the rising dollar environment affected diversified investors. Most asset classes suffered through 2015. The S&P 500 stayed flat, long term Treasuries lost 2%, gold lost 9%, emerging markets shed 17% and USO, the crude oil ETF was down 44%. To make things worse, in August 2015 there was a sharp correction in equities which caused many "weak hands" to just exit the market. The first half of 2016, by contrast, rewarded anyone holding any of these assets.The second half proved far more challenging as rising yields expectations depressed bond prices, with TLT loosing 16% from July to December. Expecting higher yields in the U.S. can cause an appreciation in the U.S. dollar which in turn causes weakness in dollar denominated assets like gold and foreign equity. All of these assets gave back some of the early 2016 gains. Two major events, the Brexit vote and U.S. elections proved to be much less disruptive than expected. For 2016, The S&P 500 returned 12%, long term Treasuries gave up early gains to stay flat and gold gained 6%. Emerging markets gained a respectable 14%. All our strategies were positive for the year. Our 'non-equity' strategies did well outperforming their respective benchmarks: Our volatility harvesting strategy (MYRS) returned 29.92%. Our Bond rotation strategy (BRS) returned 13.62%, compared to 1% for TLT and 2.4% for AGG. Our Gold hedged strategy (Gold-USD) returned 15.74% compared to 6% for Gold. For 2017, in preparation for rising yields, we have adapted our strategies to rely less on the 30-year Treasury ETF (TLT). We introduced inflation [...]
A hedge is always an investment which is negatively correlated to the main investment. When the main investment goes down, the hedge should go up and if the main investment goes up, then the hedge normally goes down. It is clear, that we like the first, which is to reduce the draw downs with a hedge, but not to reduce the gains. If you have a stock portfolio, then the main hedge possibilities are: A VIX ETF like VXX or a VIX Future. These have nearly a -1 correlation. An inverse ETF on a index like SH which is the inverse of the S&P 500 SPY ETF Precious metals like GLD or SLV Treasuries A lot of people use 1) and 2) to hedge their positions. This may probably make sense if you have a big stock portfolio, and you can not sell everything instantly in case of a market crash. These two must be perfectly timed. I do not think it makes sense to use them as a hedge for longer periods because the VXX ETF has an extremely strong down trend of about 5-10% per month. This is a very effective but also very expensive hedge. Such a hedge will ruin the performance of your portfolio if you keep it longer then one or two weeks. Same with SH. Because the S&P 500 has a long term up trend of about 8%, you will lose about these 8% per year if you use SH as a long term hedge. Precious metals 3) are much better. They are a safe haven investment. They normally have an inverse correlation to the stock market in times of trouble and on the longer term they should go up at least because of inflation. Gold and Silver are today priced about at their [...]
- The Gold-Currency strategy trades Gold vs 3 major currencies.
- It is based on the negative correlation between Gold and the U.S. dollar Index.
- It is an excellent addition to existing equity or bond portfolios as it holds very little correlation to either.
- It can be traded using ETFs, Futures or even low-margin/low-cost FX pairs.
An analysis of Harry Browne´s Permanent Portfolio and further enhancements towards: A Permanent Portfolio ETF Rotation Strategy employing Momentum, Mean Reversion, and Volatility Targeting. It’s not just cars. It’s investment strategies like the permanent portfolio, too. Vintage "all-weather" investment strategies are often simple, easy to execute and give amble 'out-of-sample' data. In other words one can see how they performed in life years after they have been proposed. And like the VW bug, they are "safe" choices. Tried and true. Can you imagine a 1965 VW running in the Autobahn? Although the essence counts for a lot, for the car to survive at today's highway speeds the tech needs to be up to date. So let’s take my favourite oldie and bring it up to speed: Harry Browne’s Permanent Portfolio. The Permanent Portfolio by Harry Browne From Investopedia: … Browne believed that the four asset classes would thrive in one of the four possible macroeconomic scenarios that exist. Stocks would thrive during periods of economic prosperity. Bonds would do well in deflation and acceptably well during periods of prosperity. Gold during periods of high inflation would rapidly increase in value as the only true defence against a deteriorating currency. Cash would act as a buffer against losses during a routine recession or tight-money episode, and would act well in deflationary times. So let’s see how the original permanent portfolio Harry Browne first published has performed. The original rules of the All Weather Portfolio: 25% in a stock market Index ( S&P 500) 25% in Treasuries 25% in Gold. 25% in Cash or similar Not bad. Annual return is 7.1% and maximum draw-down comes in at 17.84% since 1992. For a far more detailed analysis of the so-called fail-save investment or permanent portfolio or "PP" you can see Gestaltu's excellent "PP Shakedown" [...]
Special Topic: IRA investment using QuantTrader Logical Invest Investment Outlook December 2016 Our top year-to-date strategies: The Maximum Yield strategy with 30.27% return. The Leveraged Universal strategy with 17.73% return. The NASDAQ 100 strategy with 15.19% return. SPY, the S&P500 ETF, returned 9.77%, year-to-date. NEWS: Enhancement of the Treasury hedge in our strategies (link). Market comment: Presidents change, markets change and so do we. As our subscribers know well, Treasuries have been a cornerstone of our strategies. For the last few months many investors remained sceptical as 0% interest rates meant there was only one way for rates to go: Up. Although the logic has merit, markets often defy common sense and with the help of central banks the unthinkable became a reality: negative interest rates. Adding Treasuries to one's portfolio proved to be an excellent strategy, post 2009. We still believe the 30-year Treasury etf (TLT) is an excellent diversifier for our strategies but recent developments convinced us that alternative hedging instruments are worth pursuing. For that reason we are changing our methodology to allow the use of inflation protected treasuries (TIPS) as well as well as our Bond Rotation strategy itself (BRS), as hedges to our equity portfolios. As an example, our Universal Investment strategy will allocate a percentage of assets to SPY and the rest to either TLT or TIP based on TLT vs TIP rules-based evaluation. Strategies like the Global Market Rotation will hedge their equity part with the BRS strategy as a whole. You can find a more detailed explanation of the new methodology in this article. This month was a difficult one for many of our strategies because of the simultaneous drop in treasuries, gold and non-U.S. equity markets as the US$ surged about 4.5% compared to major foreign currencies. GMRS lost 8% this month alone, followed by the BUG (leveraged version) at -6% due to the TLT and GLD [...]
Special Topic: IRA Investments using QuantTrader, our Backtest Software Logical Invest Investment Outlook November 2016 Our top year-to-date strategies: The Maximum Yield strategy with 32.61% return. The Leveraged Universal strategy with 21.42% return. The World Top 4 with 17.66% return. SPY, the S&P500 ETF, returned 5.87%, year-to-date. Market comment: Recent surveys show that fund managers have increased cash positions1 while outflows from equity funds are at historically high levels2. From a contrarian point of view this could be considered market positive. There are two bullish seasonal biases kicking in: The presidential year is nearing an end and we are walking into the traditional strongest months of the year. The beginning of the month may be volatile as markets react to elction results. It remains to be seen how and if these results will affect the rest of the year. All our strategies corrected during October. Our hedged Gold strategy was almost flat at +0.17% while our aggressive 3x UIS suffered a -11.02% correction. The World Top 4 lost -1.80% while most other strategies lost anywhere from -2 to -4%. This was partly due to a sudden correction in Treasuries, causing TLT to lose almost 5% for the month. SPY was down -1.73% and GLD -2.74%. This type of rise in cross-asset correlation was seen in 2015. In the graph below you can see how TLT an GLD correlations to SPY turned positive in October. Correlations of TLT and GLD become positive end of October. We have found this type fo behaviour to correlate to a strengthening dollar. UUP the ETF that tracks the dollar index is up 3% for the month, a fairly large move, causing the index to approach towards it's 2015 highs. We are taking this into consideration even though the environment is quite different this year. While commodities and foreign markets were crashed by the 2015 dollar move, selected markets are showing tremendous strength, namely coal (KOL:+69% [...]
In our recent post we´ve shared some powerful options to design a well-balanced portfolio of several Logical Invest strategies to achieve a preset portfolio objective using Modern portfolio theory (MPT) techniques developed by Nobel Prize laureate Harry Markowitz. Here, we review the steps to achieving an optimized portfolio with our tools and summarize some portfolio options to illustrate use of our updated tool set:(picture for mobile use)These options might serve as a starting point to design your own portfolio according to your return and risk preferences, fundamental beliefs or asset class preferences.How do I start easily designing my portfolio?You can design a portfolio to meet your objectives in three simple steps that will not take you more than 30 minutes initially, and about 15 minutes monthly for rebalancing: Design and Execute your Custom Portfolio Starting with our Online Custom Portfolio Builder, you can simply select a preset portfolio objective. The tool will report back the allocation across our strategies that achieves that objective based on our quantitative models, and on portfolio optimization procedures that analyze the last 2105 trading days. Additionally, the user can select the “Custom Portfolio” tab, enter any strategy allocation weights he wishes and similarly calculate the performance of his custom allocation. Combined with our “Consolidated Signals” tool which we will introduce in a minute, the results from Portfolio Builder will point the user to the allocation across ETFs and/or stocks that have the best prospect to meet his objective.A Practical Example:Here is a practical example: Let´s assume I think a historical portfolio volatility of around 15% in the period 2008-2016 is acceptable to me I would simply choose the “Max15% Volatility” (and Max CAGR) portfolio from the preconfigured portfolio list. Strategy allocation weights are immediately shown in the performance table and the portfolio risk/return performance is graphed in comparison to that [...]