The development of ETFs has made it possible for any retail investor to easily take exposure to virtually any asset class in the world, be it stocks, bonds, currencies, commodities either on the long or the short side. The granularity and flexibility of these investment vehicles now allow anyone to implement strategies that reward savvy investors with high absolute returns, limited risk and low cost. More important, such returns can be achieved with a high degree of consistency and a low trading frequency (usually once a month), whatever the stock market conditions are (bull, bear, sideways). All the strategies detailed and monitored in My ETF Hedge Fund recorded positive returns every year since 2003. Such results were achieved with lower volatility and, most importantly, much smaller drawdowns that any diversified traditional portfolio.
- There is momentum everywhere, not only within one asset class, but across asset classes and countries. This feature of global capital markets has been clearly identified in academic literature. Investors can benefit from this powerful market force by determining a consistent universe of asset classes and adequately rank them to base trading decisions. At My ETF Hedge Fund, we have developed a proprietary ranking systems based on past risk-adjusted returns which provide a significant edge on best performing asset classes. It represents the main brick on of decision tree. Read research papers on relative strength.
- There is a need to regularly update a portfolio’s tactical asset allocation to take advantage of trends developing and protect the portfolio from bear markets and resulting large drawdowns. At My ETF Hedge Fund, we usually rebalance our portfolios monthly. Under certain market conditions, more frequent updates are sometimes warranted. This strikes a right balance between buy and hold (arguably the worst possible investment strategy in modern markets) and day-trading, allowing any retail investor to reap the benefits of dynamic strategies with minimal time dedicated to following market developments.
- At the end of every month, the inputs from our ranking model are complemented with fundamental and technical analysis indicators and quantitative risk-management considerations to determine the portfolio that will be held for the next month