A Basic ETF Market Timing Portfolio For January (BND, DBC, VEU, VNQ, VTI)

In July 2009 I profiled a momentum based ETF portfolio. In an effort to be more user friendly and provide out of sample results, I track this portfolio (and others) monthly on my blog using Google Docs. The portfolio consists of 5 basic ETFs: Vanguard Total Bond Market ETF (NYSE:BND), Powershares Commodity Index (NYSE:DBC), Vanguard FTSE All-World ex-US ETF (NYSE:VEU), Vanguard REIT Index ETF (NYSE:VNQ), Vanguard Total Stock Market ETF (NYSE:VTI). 
 
Despite only being 5 ETFs, one could take multiple approaches to the portfolio, from buying and holding to actively managing it; or an investor could use a combination of different approaches or trading strategies. Listed below are the month end results for December of the 5 ETFs listed above. One could purchase the top 1,2, or 3 performing ETFs based on momentum as judged by the 3-6-12 returns or just the 6 month returns. In this case, that would indicate a purchase of VNQ, VTI and DBC (3-6-12 strategy).  This combination of ETFs differs from last months list with VTI as the new addition and VEU dropping to fourth.  BND’s momentum continues to significantly lag the other four ETFs.
 
Another twist an investor could add would be to purchase the underlying securities based on momentum only if they are also trading above their 200 day moving average (or another moving average of your choice). At the end of December, all 5 ETFs were above their 200 day simple moving average. 
 

Many of the strategies listed here were inspired in part by Mebane Faber, author of The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets. For an even better explanation of some of the strategies, I recommend the book. Also, he has a new project which allows users to replicate the best performing hedge funds, AlphaClone.

The data source for the information below is Finviz, which has some of the best free financial data on the web (as well as a new elite service) and Google Finance.

Ticker Company Trend Performance (Quarter) Half Year Year Average Return 200-Day SMA
(BND) Vanguard Total Bond Market ETF Here -1.30% 1.03% 6.21% 1.98% 0.79%
(DBC) PowerShares DB Commodity Index Tracking Here 14.03% 29.95% 11.90% 18.63% 16.20%
(VEU) Vanguard FTSE All-World ex-US ETF Here 6.26% 26.04% 11.83% 14.71% 11.32%
(VNQ) Vanguard REIT Index ETF Here 6.95% 24.29% 28.38% 19.87% 9.44%
(VTI) Vanguard Total Stock Market ETF Here 11.33% 25.98% 17.44% 18.25% 11.73%

Written By  Scott’s Investments  No current positions

Leave a Reply

Your email address will not be published. Required fields are marked *