An ETF Relative Strength Portfolio for July (SPY, IEF, TLT, LQD, PCY)

I previously detailed here and here how an investor can use ETF Replay to screen for best performing ETFs based on momentum and volatility. Users can set up their own portfolios, track, and backtest them for free on ETF Replay. I have created a portfolio of 22 ETFs which I believe represent a broad range of markets.  I will be updating and tracking the portfolio monthly on my site.  The strategy is simple: purchase the top 3 of 22 ETFs based on a combination of their 6 month returns, 3 month returns, and 3 month volatility (lower volatility receives a higher ranking; users have the flexibility to change these timeframes as well).

The strategy has tested well over the past several years – since 2005 it has a total return of 128.2% with 15.2% volatility versus -4.7% return for (NYSE:SPY) and 23.7% volatility.  Since not all ETFs in the backtest I created traded in 2005 I also ran the backtest starting in 2007.  Since 2007 total return was 58.9% vs -21.5% on (NYSE:SPY) with 15.5% volatility versus 28.7% for (NYSE:SPY).

As of the close on June 30th, the top 3 ETFs in the basket of 22 were:

1) (NYSE:IEF) – iShares 7-10 Year Treasury
2) (NYSE:TLT) -iShares Long-Term Treasury
3) (NYSE:LQD) – iShares Investment Grade Bond

The top 3 on May 28th were:

(IEF), (PCY) (emerging market bond), and (TLT) which combined for a return of 3.71%

The full list of 22 will be posted shortly on the right-hand side of my site.  It is a fluid list to which I may add/subtract ETFs in the future.

Written By Scott From Scott’s Investments

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