ETFReplay.com Portfolio For June

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Includes: DBA, LQD, PCY, RWX, TLT, VNQ
by: Scott's Investments

The ETFReplay.com Portfolio holdings have been updated for June 2014. I previously detailed here and here how an investor can use ETFReplay.com to screen for best performing ETFs based on momentum and volatility.

The portfolio begins with a static basket of 15 ETFs. These 15 ETFs are ranked by 6 month total returns (weighted 40%), 3 month total returns (weighted 30%), and 3 month price volatility (weighted 30%). The top 4 are purchased at the beginning of each month. When a holding drops out of the top 5 ETFs it will be sold and replaced with the next highest ranked ETF.

In addition, ETFs must be ranked above the cash ETF SHY in order to be included in the portfolio, similar to the absolute momentum strategy I profiled here. This modification could help reduce drawdowns during periods of high volatility and/or negative market conditions (see 2008-2009), but it could also reduce total returns by allocating to cash in lieu of an asset class.

The top 5 ranked ETFs based on the 6/3/3 system as off 5/30/14 are below:

6mo/3mo/3mo
PCY PowerShares Emerging Mkts Bond
VNQ Vanguard MSCI U.S. REIT
RWX SPDR DJ International Real Estate
TLT iShares Barclays Long-Term Trsry
LQD iShares iBoxx Invest Grade Bond
Click to enlarge

The portfolio maintains positions in VNQ, and LQD for the month of June. DBA was sold for a gain of 1.24% after purchasing it originally on 2/28/14. VTI was sold for a gain of 2.14% and purchase date of 4/30/14. The proceeds were used to purchase RWX and PCY.

Beginning in 2014 we track both the 6/3/3 strategy (same system as 2013) as well as the pure momentum system, which will rank the same basket of 15 ETFs based solely on 6 month price momentum. There is no cash filter in the pure momentum system, volatility ranking, or requirement to limit turnover - the top 4 ETFs based on price momentum will be purchased each month. The portfolio and rankings will be posted on the same spreadsheet as the 6/3/3 strategy.

The top 5 six month momentum ETFs are below:

6 month Momentum
VNQ Vanguard MSCI U.S. REIT
DBA PowerShares DB Agricultural Commodities
TLT iShares Barclays Long-Term Trsry
PCY PowerShares Emerging Mkts Bond
RWX SPDR DJ International Real Estate
Click to enlarge

For June the portfolio maintains positions in TLT, VNQ and DBA. VTI was sold for a gain of 3.86% and purchase date of 12/31/13. Proceeds were used to purchase PCY.