Momentum Portfolio July Update

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Includes: EEM, EFA, GLD, PCY, RWX, SHY, TIP, TLT, VNQ, VTI
by: Scott's Investments

In 2011, Scott's Investments began tracking a momentum portfolio which ranks a basket of ETFs based on price momentum and volatility. In 2014, I also introduced a pure momentum system, which ranked the same basket of ETFs based solely on price momentum. Both strategies have undergone minor revisions over the years but the key elements remain.

The strategies in their current form begin by screening a basket of these 10 ETFs:

RWX SPDR DJ International Real Estate
PCY PowerShares Emerging Mkts Bond
EFA iShares MSCI EAFE
EEM iShares MSCI Emerging Markets
VNQ Vanguard MSCI U.S. REIT
TIP iShares Barclays TIPS
VTI Vanguard MSCI Total U.S. Stock Market
GLD SPDR Gold Shares
TLT iShares Barclays Long-Term Trsry
SHY iShares Barclays 1-3 Year Treasry Bnd Fd

The ETFs in the "Conservative Momentum" system are still ranked by 6-month total returns (weighted 34%), 3-month total returns (weighted 33%), and 3-month price volatility (weighted 33%). The top 3 are purchased at the beginning of each month and if a holding drops out of the top 3 at the next month's rebalance it is replaced.

Pure Momentum System

The pure momentum system ranks ETFs based on 5-month price momentum. There is no cash filter in the pure momentum system, volatility ranking, or requirement to limit turnover. The portfolio and rankings are posted on the same spreadsheet as the Conservative Momentum strategy.

A free option for backtesting these strategies is available at Portfolio Visualizer.

The conservative momentum system has turnover in one position this month. RWX was sold for a capital loss of 3.9% and purchase date of 5/1/2018. The proceeds were used to purchase VTI.

The pure momentum system has turnover in two positions. GLD was sold for a capital loss of 5.68% and original purchase date of 3/30/2018. VTI was sold for a gain of .28% and purchase date of 5/31/2018. The proceeds were used to purchase TIP and VNQ.

The current portfolios are below:

Conservative Momentum

Position Shares Avg Purchase Price Purchase Date Cost Basis Current Value Percentage Gain/Loss Excluding Dividends
VTI 34 140.43 6/29/2018 $4,774.62 $4,774.62 0.00%
TIP 43 111.79 5/1/2018 $4,806.97 $4,853.41 0.97%
SHY 57 83.56 3/30/2018 $4,762.92 $4,752.09 -0.23%

Pure Momentum

Position Shares Purchase Price Purchase Date Cost Basis Current Value Percentage Gain/Loss Excluding Dividends
TIP 32 112.87 7/1/2018 $3,611.84 $3,611.84 0.00%
SHY 47 83.46 5/31/2018 $3,922.62 $3,918.39 -0.11%
VNQ 45 81.45 7/1/2018 $3,665.25 $3,665.25 0.00%

Disclosures: None.