Factor Investor - ETF - removed SA https://www.portfolio123.com/port_summary.jsp?portid=1619836
Speaking of factor ETF’s, this model selects from a list of them. Kinda hard to justify using a p123 model when you can just buy the factor ETF directly, but anyways.
Small and Micro Cap Trader - 5 stocks - Removed DM https://www.portfolio123.com/port_summary.jsp?portid=1596869
This model is a good example of all the small cap value models that performed poorly in recent years. I have countless variations of this model, which I spent lots of time developing, and all have turned out like this. Seems like the amount of effort put into a model is inversely correlated with real time performance.
A permanent portfolio of TQQQ(40%) TMF(40%) and GBTC (20%) would be up 209% this year and over 70% Annually for the last 5 years. Unfortunately you would have a 45% drawdown. If your in for the long run I think your good. GBTC is uncorrelated to TQQQ so they work well together. If you want to lower the volatility more try using TAIL. You can get the drawdown to under 20 but you also brings down the returns a lot. There is no free lunch. I have been trying to learn option stack to see if I can minimize the drawdown and the drag but no luck yet. Trading options is very hard to learn. So much harder than stocks. For those who don’t like leverage you can use QQQ, TLT with GBTC(5-10%). Still good results. I don’t market time either I try using uncorrelated assets and dynamically allocate them with the performance and volatility.
Large Cap Momentum Plays - 10 Stocks
Quickly looking at some of the trades I see a lot of Technology like Tesla. I just use a universe of FAANGM and pick the best 2 each month. It’s up 250% this year. I have tried adding Tesla and Nvidia but the way I trade it does not help. I pick low volatility and those two stocks are very volatile.
Factor Investor - ETF - removed SA
Gave up on factor investing long time ago. Listened to many podcasts on why it is very difficult and given that you can index to provide good returns does not seem worth it to me.
Small and Micro Cap Trader - 5 stocks - Removed DM
As mentioned above gave up on this a long time ago. I thought that being a small guy you could beat the big guys. Still very hard I think once you have something working it gets overcrowded and your edge is gone. This is supported by research. As mentioned the vast majority of Designer models fail and go to the grave yard. Will value investing come back some day maybe but it could take 10 years or it could be tomorrow.
I beg to differ. See my microcap and small-cap DMs: https://www.portfolio123.com/app/r2g/summary?id=1523689 and https://www.portfolio123.com/app/r2g/summary?id=1489433. I’ve been trading microcaps and small caps using P123 for five years now and the CAGR of my entire portfolio since I started in November 2015 is 41%. For me, at least, the amount of effort put into a model correlates well with real-time performance, and the tools P123 makes available to its subscribers has allowed me to achieve strong and consistent performance without too much volatility (my five-year Sharpe ratio is 1.84). I’m bragging, and I don’t like bragging; it makes me feel like a jerk. But I really want readers of the forum to know that while small-cap strategies have not worked for some users, they have worked for others. I’m certainly not the only P123 user who has had strong returns with small-cap strategies.
Congratulations you are in the top percentile of actively managed strategies. You are obviously an outlier. Just like 95% of active managers cannot beat spy and the majority of designer models fail after 3 years. If you brought up all the failed models that don’t exist anymore I would guess it’s 95% fail but no one is going to do that. If you can maintain 41% for 3 years you probably having something good. 5 years you are beyond good and should really work for a hedge fund. 10 years and you would be in the top ten of all time. For the majority of people they should just index and try to find some way to get a little alpha with a higher sharp ratio. P123 is one tool to do that and there are many others. Like any tool you need to do countless hours of work and research. I’m just saying your odds of success are much better indexing. The future might be different but let’s wait and see.
I do not mind leverage. But I do not like the volatility-drag that occurs with 2X AND 3X ETFS.
RPAR is a risk-parity ETF started this year by people formerly with Bridgwater Associates’ All-Weather-Fund. So the people running it are experienced with risk parity. Their fund has done well this year: better than any of the other risk parity funds. And similar returns to the SP500 with less risk (including a smaller drawdown).
Pertinent to this thread because they get leverage for the bond portion of their fund using futures—therefore without the volatility drag. And they may benefit from some rollover yield.
They also invest in global equities (including US equities through VTI) and commodities including gold.
If you do not like their mix of risk/reward but you are happy with some global stocks and commodities you could buy RPAR—benefitting from the leverage of bonds–and add addition funds changing the overall mix of assets.
Also some adaptive models become too concentrated and need to be constrained (i.e, the model holds too much of one thing or asset class at a time). Holding a fixed percentage of RPAR is a simple, mindless way to keep the concentration of your holdings constrained.
Because of the use of leverage and because RPAR helps constrain the concentrations of assets, I use it as part of an adaptive allocation strategy.
Great ideas as far as diversifying portfolios everyone!!!
For anyone not familiar, risk parity does what Hoyt does essentially. But it tries to make each asset have the same level of risk—levering up the less risky assets until the risk level is the same for each asset class. Theoretically this could help during times when the assets are not correlated. Help by further reducing the problems of volatility-drag and potentially by reducing the drawdowns. And keep the returns of the less risky assets on par with equities. At least that is the theory.
Anyway, no matter how you do it Hoyt is on to something, I believe.
