ETFReplay.com Portfolio For August

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 |  Includes: DBA, EEM, PCY, RWX, TLT, VNQ, WIP
by: Scott's Investments

The ETFReplay.com Portfolio holdings have been updated for August 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 8/1/14 are below:

6mo/3mo/3mo
RWX SPDR DJ International Real Estate
PCY PowerShares Emerging Mkts Bond
EEM iShares MSCI Emerging Markets
VNQ Vanguard MSCI U.S. REIT
WIP SPDR Int'l Govt Infl-Protect Bond
Click to enlarge

The portfolio maintains positions in VNQ, RWX, and PCY for August. TLT was sold for a gain of 0.92% after purchasing it originally on 6/30/14. The proceeds were used to purchase EEM.

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
EEM iShares MSCI Emerging Markets
RWX SPDR DJ International Real Estate
VNQ Vanguard MSCI U.S. REIT
PCY PowerShares Emerging Mkts Bond
WIP SPDR Int'l Govt Infl-Protect Bond
Click to enlarge

The 6 month momentum system maintains positions in PCY and VNQ for August. TLT was sold for a gain of 3.11% and original purchase date of 4/30/14. PowerShares DB Agricultural Commodities (NYSEARCA:DBA) was sold for a loss of 6.07% and original purchase date of 3/31/14. The proceeds were used to purchase EEM and RWX.