TLH

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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 [...]

2017-10-02T20:00:00+00:00By |7 Comments

401k investment: Sleep Well Bond Rotation Strategy – Annual performance of 15%

You can employ this strategy perfectly in your 401k investment, because it outperforms the stock market by more than double and this with one third of the volatility or risk. This means that since 2008, the return to risk ratio is about six times higher than an investment in theáSPYáETF which tracks the S&P 500. Even this year, when many investors are selling bonds due to increasing yields through FED tapering, the bond rotation strategy has delivered positive double digit returns. The Bond Rotation Strategy (BRS) - an ideal 401k investment The BRS Strategy invests in the top one or top two ETFs out of a selection of five bond ETFs which is then rebalanced on a monthly basis. The backtested returns of the strategy since 2008 is very impressive compared to a traditional "buy and hold" strategy, thus making it ideal for any 401k investment. The data below refers to the returns for holding the top two ETFs in the strategy. The figures in brackets show the returns for holding the top ETF only. The top two ETF strategy has a slightly better return to risk ratio than the top one ETF strategy. So, for larger amounts of 401 investment money (> 100'000$), I would advise investing in the top two ETFs rather than simply holding one. Annual performance (CAGR) = 15.7% (19%) compared to S&P500=5.4% Total performance since 2008 = 133% (175%) compared to S&P500=33.1% Volatility (annualized) = 6.75% (9.45%) compared to S&P500=24.7% Return to Risk Ratio (Sharpe Ratio) = 1.79 or 1.68 compared to S&P500=0.25 Alpha compared to AGGá= 62% Strategy performance 2008-2013 Black - Top one Bond Rotation Strategy Blue - Top two Bond Rotation Strategy Green - AGG iShares Core Total US Bond (4-5yr) Red - SPY SPDR S&P 500 The Bond strategy ETFs [...]

2017-10-02T20:00:00+00:00By |8 Comments

The new reviewed Bond Rotation Strategy

From the next strategy email on,áthe Bond Rotation Strategy will also use adaptive ETF allocation, to make is more suitable as IRA or 401k Investment Strategy. This new technique allows a 30% higheráSharpe (return to risk) ratio. Together with this change we have also changed the ETF selection from the old: AGG - iShares Core Total US Bond (4-5yr) BOND - PIMCO Total Return ETF CWB - SPDR Barclays Convertible Bond HYLD - AdvisorShs Peritus High-Yield Bond (3-4yr) SHY - Barclays Low Duration Treasury (2-yr) TLH - iShares Barclays 401k 10-Year Treasury (9-11yr) Ro the new ETF selection: CWB - SPDR Barclays Convertible Bond JNK: SPDR Barcap High-Yield Junk Bond (4-7yr) PCY: PowerShares Emerging Mkts Bond (7-9yr) TLT: iShares Barclays 401k Long-Term Trsry (15-18yr) The new BRS strategy does not need the total US market bonds AGG and BOND anymore. In fact for the old strategy, these bonds have been used to simulate an intermediate mix between treasuries and corporate bonds. The new BRS strategy can now invest in any mix of these bonds due to the adaptive allocation. Also the SHY (cash) ETF is not necessary anymore, because the allocations willábe automatically reduced to zero if this would beánecessary. Excellent features as an IRA or 401k Investment Strategy We also go back to the passively managed JNK high yield junk bond after the actively managed HYLD junk bondáwas showing an extremely bad performance these last months. So better don't have any fund manager interfering with the strategies in the future. New is the emerging market sovereign debt bond PCY which gives the strategy some international diversification. TLH has been replaced by the more liquid TLT treasury ETF. All together, the strategy becomes simpler, with less ETFs, but witháa significantly better performance. We recently were approached by a subscriber [...]

2017-10-02T20:00:00+00:00By |5 Comments

The new enhanced Bond Rotation Strategy with adaptive allocation

On November 2013 I published the first SA article on the Bond Rotation Strategy (BRS) as excelent diversifier for a 401k Investment Portfolio.áNow, 15 months later, I am presenting an important update for this strategy with adaptive allocation. Even though the old strategy has done well (see charts here: https://logical-invest.com/strategy/bond-rotation-sleep-well/), I think it is very important to constantly validate and improve any investment strategy. Markets change, ETFs change even we ourselves grow and learn. Especially as I┤ve been approached by US Investors asking whether this was a suitable strategy for 401k Investment Portfolio. I am also glad to say that I am still improving my knowledge and striving to pass that knowledge as to grow the returns and limit the risk of my own investments. Approach of Universal Investment Strategy, better suited asá401k Investment Portfolio In November 2014 I presented the Universal Investment Strategy which was based on a variable allocation of the SPY-TLT ETFs (http://seekingalpha.com/article/2714185-the-spy-tlt-universal-investment-strategy). This new concept of an ETF rotation with variable allocation is very versatile and can be used on all types of strategies. For the BRS strategy, this new way to calculate allocations results in a considerably improved Sharpe (Return/Risk) ratio of the strategy. Here is the ETF selection for the BRSá Old ETF selection New ETF selection CWB - SPDR Barclays Convertible Bond CWB - SPDR Barclays Convertible Bond JNK - SPDR High-Yield Junk Bond (4-7yr) JNK - SPDR High-Yield Junk Bond (4-7yr) TLH - iShares 10-Year Treasury (9-11yr) TLT - iShares Long-Term Trsry (15-18yr) PCY - PowerShares Emerging Mkts Bond (7-9yr) AGG - iShares Core Total US Bond (4-5yr) not necessary anymore BOND - PIMCO Total Return ETF not necessary anymore SHY - Barclays Low Duration Treasury (2-yr) not necessary anymore. The total allocation can go automatically below 100% An advantage of [...]

2017-10-02T20:00:00+00:00By |5 Comments