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Invest With An Edge ... Market Leadership Strategy ... 04/28/2014 update

Old_Skeet
edited April 2014 in Fund Discussions
The Market Leadership Strategy always has two holdings with nominal weighting of 50% each. Based on the rankings, one of the positions can be a money market fund. This strategy will buy the top two (2) ranked funds and hold them as long as they are ranked as a top-5 fund. If a holding drops below #5, the strategy will sell it and purchase the highest ranked style not already owned. Additional information on interpreting and following this strategy can be found below. - See more at: http://investwithanedge.com/leadership-strategy#sthash.c88qMSRA.dpuf

Comments

  • LLJB
    This is a similar trend following strategy to the FundX newsletter, although the newsletter's process is only based on the actual performance of mutual funds and ETFs rather than the multiple factors mentioned in the article.

    I'm always a little worried about approaches that appear developed with 20/20 hindsight though. For instance, why not follow the trend for industry sectors rather than capitalization categories? Or why not include emerging markets?

    A pretty large majority of the outperformance came when the back testing was based only on the relevant index rather than an ETF. Has anyone actually followed this strategy?
  • Old_Skeet
    edited April 2014
    Hi LLJB,

    I use to follow the strategy as described above. Now, I follow the strategy to see which assets are the most favored ones to hold. I study my portfolio through Morningstar's Instant Xray then compare my holdings against those favored in the strategy. Should I feel I am short the favored assets then I'll reconfigure the weightings.

    Old_Skeet
  • Kaspa
    I have used a momentum based strategy for a long time now and have increased the portion of my portfolio invested in this strategy progressively from about 10% to about 40% now.
  • LLJB
    Hi Old_Skeet,

    That's a very interesting approach. It sounds like rather than a pure 50/50 allocation to the two trending areas, you overweight them. How do you decide the extent to which you overweight the trending categories? And if you're using mutual funds do you ever run into difficulty with short-term redemption fees?

    Thanks, LLJB
  • Kaspa
    I have actually thought of a pretty simple strategy and wondering if anyone uses something similar. Barclays has allocation ETFs which have different portions allocated to different global sectors. The range is from the conservative AOK, moderate AOM, growth AOR, and aggressive AOA. One can think of shifting from
    an aggressive AOA to conservative AOK based on trends. For example, we can use 200 or 50 day moving averages, as Charles had analyzed a while back.
  • Old_Skeet
    Hi LLJB,

    I consider the top five positions to be the ones in the faster currents within the market. With that, this is where I want a good representation of my portfolio's equities positioned. To do this I do a monthly Xray of my portfolio and then compare it to the top five positions listed in the Market Leadership Strategy. Currently form, a style box allocation, review about 70% of my equities are in the five favored positions.

    Old_Skeet
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