All Weather Discussion

[RobertMontgomery]

Today James Clear shared this quote which I felt summed up Tom Basso’s complicated rebalancing process.

“When nothing is working, explore and make a lot of small bets.

After something starts working, double down on what works best.

When that stops working, explore and make a lot of small bets again.”

Anyone see the similarity?

[KateMoloney]

Hi Nick

The USA returns you listed, are they domiciled in $AUD or $USD ?

I my testing so far there is quite a big difference between the two.

[Nick Radge]

AUD.

Over extended lengths of time, the currency differential has been nominal.

[Nick Radge]

@Scott
I think I have a way to code that theory. I’ll have a go on the plane on the way home.

Nick

[Nick Radge]

Continuing to explore low volatility, low maintenance investment strategies. This is a $SPY + $TLT timer that allocates 50% to either based on the underlying trend.
CAGR +6.2%
maxDD: -11.5%
Vol: 6.8%
AvgExposure: 61%

[Nick Radge]

Here’s a slight variant.
SPY 50%
GLD 30%
TLT 20%

CAGR +6.5%
maxDD: -9.8%
Vol: 7.1%
AvgExposure: 64%

 

[Nick Radge]

After implementing my All Weather portfolio for US ETFs in my retirement account, I have been working on a second All Weather portfolio for the ASX.

This one uses two portfolios; one defensive and one offensive. The defensive gets 50% allocation to a single ETF, and the offensive gets 50% allocation across 2 ETFs.

CAGR: +10.9% (Benchmark: +7.8%)
maxDD: -10.2% (Benchmark -35.8%)
Vola: 9.3% (Benchmark 15.6%)
Corr: 0.21

 

[PaulBailey]

    Really enjoying this thread.

I’ve been looking / coding a GLD / SPY ETF strategy with the SPX as an index.

Using a simple entry gate ROC.

My results are nowhere near as impressive as others published here:

ROR 12.3%
MaxDD 21%

….. but I think I’d be willing to trade it.

[PaulBailey]

Nick,
thinking about how I might come anywhere close to replicating your US ETF strategy.

Not quite sure what you are willing to share – can I ask how many ETFs are in your rotation, and how many – max – your system holds at any given time? (It might be a different number).

Cheers

PB

[Nick Radge]

Paul,
The US one uses 6 ETFs with the following allocations

Equities      60% (2x 30%)
Defensive   30% (3x 10%)
Alternate     10% (1x 10%)

The entry rule can occur anytime during the month so long as the timing tool is positive.
The exit rule is only ever at month-end.

At the moment the portfolio is 80% invested; one of the defensive ETFs is trending down and the Alternate is trending down.

There is a list of alternatives HERE but it could be anything outside of equities or defensives. 

 

[PaulBailey]

So I’ve experimented with different combinations now for several days.

Entry criteria:
Variations of MA and ROC

Exit criteria
EOM
EOM or falls below entry criteria

Variety of high turnover ETFs as outlined / suggested above.

My best efforts end up with:
ROR low teens
MaxDD around 20%

Feel like a more subtle entry criteria / screen is the key.

[PaulBailey]

Well I’ve made *some* progress.

I now have a US ETF strategy running 5 separate ETFs:

ROR 20.12%
Max DD 30%

Next task: Retain as much of the ROR as possible whilst driving the Max DD down.

[ScottMcNab]

The more I’ve played around with the Australian etfs the more I’ve come to appreciate how impressive these results are from 2014/15……10/-10 with vola of 10….its nice to have something to aim for

[Nick Radge]

Here’s another example. I haven’t coded this one up as yet

https://mendelfriedman.substack.com/p/mr-dalios-all-weather-portfolio

[Nick Radge]

A few other All Weather strategies here:

https://dualmomentumsystems.com/strategies/

He uses an interesting mechanism called Smart Leverage, which basically uses a leveraged ETF (SSO) if the Russell declines more than 15% at month end.

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