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YpaFi Global Household Index: Investing In Demography

|Includes:SPY, XLP, Health Care Select Sect SPDR ETF (XLV)

The YpaFi Global Household Index holds 20 S&P 500 stocks from the Consumer Staples and Healthcare sectors, based on a systematic ranking. The next table compares the Global Household Index to SPY and to an equal weight mix of XLP and XLV rebalanced every 4 weeks.

1/1/1999-6/16/2014

Ann. Return

Volatility

Sharpe ratio

Correlation/SPY

SPY

4.83%

20.20%

0.04

1

XLP+XLV

6.52%

16.45%

0.15

0.48

Global Household Index

19.85%

15.84%

1

0.65

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Consumer Staples and Healthcare companies are less sensitive to economic conditions because they sell products and services needed every day by households. In developed countries, the baby-boomers have increasing needs in health/personal care products and services, and are at the top of their purchasing power for other daily consumption products. In developing countries, a global middle class is surging with increasing needs in the same kind of products and services. Demography makes this two trends predictable for the next two decades. S&P 500 companies are ranked in each sector according to 3 fundamental ratios that are relevant in this sector. A score is calculated, then the 10 companies of highest score in each sector are selected in equal weight. They are rebalanced every 4 weeks. This methodology is based exclusively on fundamental factors. This is a summary of a post on Ypafi.com: read the full version here.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: XLV, XLP, SPY