A Basic ETF Timing Portfolio For February (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

Scott’s Investments using Google Docs. The portfolio consists of the ETFs with the best momentum among 5 ETFs: Vanguard Total Bond Market ETF (NYSE:BND), PowerShares DB Commodity Index Tracking (NYSE:DBC), Vanguard FTSE All-World ex-US ETF (NYSE:VEU), Vanguard REIT Index ETF (NYSE:VNQ), Vanguard Total Stock Market ETF (NYSE:VTI).

 I have improved the way the portfolio is tracked on Scott’s Investments – it is now tracked as a hypothetical portfolio as if it were being managed real-time, with a $10,000 starting balance. Year to date the portfolio is up 2.99%.

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 January 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 is the same as last months list.  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 January, 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 Performance (Quarter) Half Year Year Average Return 200-Day SMA
(BND) Vanguard Total Bond Market ETF -1.60% 0.26% 5.01% 1.22% 0.43%
(DBC) PowerShares DB Commodity Index Tracking 13.30% 22.29% 22.76% 19.45% 18.40%
(VEU) Vanguard FTSE All-World ex-US ETF 4.52% 11.99% 16.91% 11.14% 11.11%
(VNQ) Vanguard REIT Index ETF 5.95% 10.75% 37.79% 18.16% 11.42%
(VTI) Vanguard Total Stock Market ETF 9.70% 16.53% 22.39% 16.21% 12.71%

 

Written By Scott’s Investments   

Scott’s Investments focuses on several different ETF portfolio strategies ranging from Basic, Individual, Country, US Sector, and Global Sector ETF portfolios.

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