Today was the last trading day of the month of September. Time to update the IVY timing portfolio signals. This post updates the signals for the basic IVY 5 asset class timing portfolio, also known as GTAA 5.
You can see the signals at world beta or at dshort as well. I have my own tracking spreadsheet on-line as well. Below is a snapshot of this month’s signals.
You can see the spreadsheet on line here. The spreadsheet updates daily but remember that only the prices at the end of the month are used to generate buy/sell signals. I also have a version of the basic IVY that uses different ETFs for the commodities (GSG in place of DBC) and bonds (VGIT in place of IEF) portions of the portfolio. GSG and VGIT have slightly lower fees than their counterparts. Also, note that due to the different composition of the ETFs the buy/sell signals may be different.
For this month VEU went back on a buy signal in both portfolios. Also, in the lower cost portfolio the commodities ETF, GSG, went on a sell signal by a small margin. Both portfolios are now aligned with the same signals. Both portfolios are 40% invested and 60% in cash.
For previous posts on the basics of the IVY timing model and its performance see here and here. There are also posts on extensions to the basic IVY portfolio to include more asset classes (here) and some more aggressive models (here). Finally, this post discusses fees, commissions, and taxes.
4 Comments
Kevin D · October 1, 2013 at 10:40 am
Paul:
Last month I switched over from the Ivy Portfolio to the more expansive GTAA strategy described by Mebane Faber in the Feb update he published on his site.
In doing so I’ve constructed a portfolio entirely out of Vanguard ETF’s. If you recall, I shared those with you several months ago. I’ve also elected to focus on the more aggressive GTAA 6 rather than the more conservative GTAA 13.
I have a question regarding calculating the 60 day rolling averages Mebane discusses in his paper. Could you elaborate on what you think is the best way to calculate these?
As always, thanks for your time and expertise.
Kevin D
01 Magna #5982
libertatemamo · October 1, 2013 at 1:37 pm
Hey Kevin, I’m not aware anywhere in the Mebane’s IVY update from Feb where he discussed 60 day, which would be 3 month, rolling averages. GTAA 6 uses the average of the 1,3, 6 and 12 month returns to rank the asset classes once per month. Can you point me to what you’re referring to?
Paul
Kevin D · October 3, 2013 at 6:45 am
Paul:
I think I misspoke. I was referring to the “relative strength strategies” Mr. Faber discusses on page 50 in his paper; “A Quantitative Approach to Tactical Asset Allocation”.
In discussing the GTAA Aggressive methodology he states: “It then selects the top six out of the thirteen assets as ranked by an average of 1, 3, 6 and 12 month total returns”. Here in lies the rub.
In a paper from “Investopedia”it discusses the use of “moving averages” as a technical indicator. In this paper it suggest using the closing price for the last 50 days of a security and adding them together. Then dividing by the number of periods.
It goes on the say that no matter how long or short a moving average you are looking to plot, the basic calculations remain the same. (ie: not advantage or disadvantage to using longer time periods)
Does this conflict with Mr. Faber’s use of the 1, 3, 6 and 12 month total returns to determine “momentum” in the strategy? In investopedia it states there is no difference in averaging the 50 day, 60 day, 90 day or 120 day moving averages to determine momentum.
I’d like to know your thoughts on measuring momentum and how you would apply it to the GTAA Agressive portfolio.
As always, thank you for your time.
Kevin D
“01 Magna #5982
libertatemamo · October 3, 2013 at 9:44 am
Kevin,
Mebane’s GTAA 6 Aggressive strategy uses two distinct ways of measuring momentum, the 10 month moving averages and the average returns over various time periods back to 1 year. It then combines the two approaches to build a ‘better’ momentum portfolio than either approach on its own. You only need to worry about 2 calculations; the 10 month moving averages for the ETFs, and the average of the 1,3,6, and 12 month returns of the ETFs. You then rank the ETFs by the avg returns and take the top 6. Then you only invest in them if they are also above their 10 month moving average. That’s it. Rinse and repeat once per month.
There is nothing wrong with what the Investopedia article is saying its just not the specific system that the GTAA Aggressive 6 represents.
Paul
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