Start to build ETF Modells, where to start?

Hi, are there good puplic ETF Ranking Systems you can reccomend?

thank you and best Regards

Andreas

I too feel that I should devote more time to ETF models. Following :slight_smile:

Good public ETF ranking systems? Maybe, but lots of “ifs” involved. My experience so far with ETF ranking is mixed. I found best backtest results when creating a custom ETF universe that only included the ones that I wanted to choose from. Do you want to include highly leveraged ETFs? If not, get them out of the universe. Either check the ETF taxonomy items available and limit the ETFs allowed or consider using Ticker to create a universe from scratch. In my opinion, this is a very important step.

Once you have a limited universe, try each of the public ranking systems over time. If you find one that looks workable, then proceed to integrating what you found with screening or simulation. My best effort so far uses a custom universe of only 4 ETFs and weekly ranks them using the ETF Rotation - Conservative ranking system to choose one of them. You might also consider modifying a copy of a public ranking system to include your criteria.

The alternative to using a ranking system is to use Buy rules that specify what ETFs are chosen, probably in conjunction with timing. Then it doesn’t matter what you specify for ranking because it isn’t used. I have had success with this method also. With either approach and more than one ETF held, you can then test weighting the holdings differently. Georg has posted some very informative examples that could help. Good luck!

If you’re interested in trying to find the right mix of index funds and fixed income funds, check out our Core Allocation model here: https://www.portfolio123.com/app/investment/add-new?browse=1&t=ALLOC&s=25&r=3. There are five different settings, from conservative to aggressive, and you can add or subtract ETFs and change the weights by clicking on the custom allocation tool at the bottom or navigating to this page: https://www.portfolio123.com/app/investment/add-new?t=ALLOC&s=-1&customize=25-R-5. You can do the same thing with our Beat the S&P 500 ETF models, each of which combines SSO with one other ETF in a smart way: https://www.portfolio123.com/app/investment/add-new?browse=1&t=ALLOC&s=39&r=2&cat=beatspy.

I only found the ETF Rotation P123 ETF ranking systems useful.

Basically ETF models only work with market timing.

Here is my latest DM model: “Wealth Manager” which has no ranking system. The idea is to do better than ETF (IEF) with less risk. I designed this for my doctor who wanted to know what to do with his money, now that he sold all his stocks in anticipation of a major stock market downturn. He wants to preserve his capital, but seeks a better return than what is available from a money market fund.

This model produced about 10% annualized return with less risk than IEF and low turnover (1x), entirely based on market timing. There is nothing wrong with a low risk model which provides a decent return.

https://www.portfolio123.com/app/r2g/summary?id=1593489

The worst case scenario is that for a short period you may have the wrong allocation with respect to market climate. You still get a better return than having your money in a savings account.


Cool, thank you for your hints!!!
Best Regards

Andreas