Last month, I started putting my new investment strategies to the test, as I shared in DIY Investing–January 2016. My goal this year is to be disciplined and update my investments just once per month and I’ve decided to do it on the last Monday of the month.
So far, during the first five weeks of tracking, the Permanent Portfolio is outperforming both the market baselines and the Faber strategy – but all were positive.
For 2016, am managing half of my retirement portfolio in each. Since I don’t want to share the actual amounts in my IRA, I am using a fictitious amount of $20,000 in my blog posts and tracking progress using portfolios on morningstar.com.
To track performance, I also created $10,000 portfolios for SPY and VBINX. Their performance:
- SPY portfolio. Up 3.21% to $10,321 in the past 5 weeks.
- VBINX portfolio. Up 2.75% to $10,275 in the past 5 weeks.
This one is super simple. As a reminder, I bought and am holding 4 equal portions of SPY (US Stocks), TLT (long-term US treasury bonds), GLD (gold), and SHY (proxy for cash; short-term US treasury bonds). Note that in January, I purchased positions in SHY ($84.77), SPY ($188.75), TLT ($126.05) and GLD ($105.60).
The last five weeks have been good for this portfolio, as it is up 3.98% as shown here.
Note that the SPY portion recovered some, but the bigger gains came from GLD.
No adjustments necessary on this portfolio.
The (modified) Faber Aggressive strategy I am suing is just like those I backtested in December, but I am targeting 4 equal positions rather than 3 or 6 as was backtested. As a reminder, here are the steps I follow each month:
- Eliminate any asset from consideration if it is below it’s 10 month simple moving average (210 day SMA is what I’ll actually use in the gtr1 tool.)
- Create a rank for each of the remaining assets by adding the 1-month, 3-month, 6-month and 12-month total returns.
- Rank the assets from highest to lowest rank and keep the top 4. If there are less than 4, then the remaining positions stay in cash.
Here is the link to the screener that I use (gtr1 link) to implement my strategy screen. Running it on February 27, the screen tells me that the four positions should be in GLD, TLT, IEF and BWX. Recall that last month, only two positions were recommended – IEF and TLT – and the rest has been in cash. BWX is an ETF holding international treasuries.
For each of these, I’ll check on the market about an hour after the open on Monday and make purchases of the two new positions sometime between 7:30AM and 11:00AM PST.
Stocks recovered from a low in January, but money seems to be flowing into bonds and other defensive assets like gold – as reflected in my portfolio selections. If the market continues its decline, I’m positioned to benefit, but if stocks recover strongly, my portfolios are likely to lag and need further adjustments next month. My indicators still call for caution.
Nasdaq – New Highs New Lows
As an overall indicator, one of the things I look at is the Nasdaq New High – New Lows, smoothed with a 30 day EMA. Note that for me, this one has been indicating caution since the August downturn and even with the huge October gains, it never made it above the zero line. It is still indicating caution for stocks.
Here is a live link to a live version of this chart (stockcharts.com link)
Slope of the S&P 500
Another think I look at is the slop of the 200-day simple moving average (SMA200) for the S&P 500. After an upturn in October, it again turned downward in December (well before the big drop in January), another indicator for caution.
Here is a live link to my a live version of this chart (stockcharts.com link)