A very simple ETF Model, monthly rebalanced, 2 funds only, in USD or CAD

1. Jan 10, 2017
Vancouver Algorithmic Trading
ETF Models
François Lucas, Founder
Sponsored by Quantopian

2. www.thespysurfer.com / info@thespysurfer.com 2/15Jan 10, 2017

3. www.thespysurfer.com / info@thespysurfer.com 3/15Jan 10, 2017
SPY4ALL ETF Model
Uber simple Rules:
●
At the end of the month, if SP500 price is below its
SMA-8,9,10,11,12 (5 SMA): allocate 0% SPY, 100% AGG (or cash)
●
At the end of the month, if SP500 price is above its
SMA-8: allocate 20% SPY, 80% AGG (or cash)
SMA-8,9: allocate 40% SPY, 60% AGG (or cash)
SMA-8,9,10: allocate 60% SPY, 40% AGG (or cash)
SMA-8,9,10,11: allocate 80% SPY, 20% AGG (or cash)
SMA-8,9,10,11,12: allocate 100% SPY, 0% AGG (or cash)
SPY = SP500 ETF (same as VFINX, IVV, VOO, VSP.TO, XSP.TO, ...)
AGG = US Aggregate Bonds ETF (same as VBMFX, BND, VBU.TO, ...)

4. www.thespysurfer.com / info@thespysurfer.com 4/15Jan 10, 2017
SMA-8,9,10,11,12 applied on SPY since 2004 (monthly data, non-adjusted)

5. www.thespysurfer.com / info@thespysurfer.com 5/15Jan 10, 2017
SMA-8,9,10,11,12 applied on SPY since Sept 2015 (monthly, non-adjusted)

6. www.thespysurfer.com / info@thespysurfer.com 6/15Jan 10, 2017
VFINX = SPY
SPY4ALL w/ Cash (blue) vs. SPY4ALL w/ Bonds (red) vs. Buy&Hold (orange)
Both reduced MaxDD and increased MAR since 1986
Bonds have been in a bull market for 30 years

7. www.thespysurfer.com / info@thespysurfer.com 7/15Jan 10, 2017
MaxDD = Maximum DrawDowns = Puke Factor
Buy&Hold (red) = -50.97% since 1986
SPY4ALL (blue) = -23.51% (-24.92% with Cash)

8. www.thespysurfer.com / info@thespysurfer.com 8/15Jan 10, 2017
VFINX = SPY
With SPY4ALL model, SP500 Allocation went to 0% (i.e. 100% bonds
or cash) in bear markets and reduced MaxDD since 1986

9. www.thespysurfer.com / info@thespysurfer.com 9/15Jan 10, 2017
SPY4ALL (blue) applied on the TSX Index (red) since 1980
Reduced MaxDD by almost 20% (less puke)
Increased both CAGR and MAR in this case

10. www.thespysurfer.com / info@thespysurfer.com 10/15Jan 10, 2017
SPY4ALL (blue) applied on the SP500 Index (red) since 1950
Reduced MaxDD by almost 23% (less puke)
Decreased CAGR, Increased MAR in this case

11. www.thespysurfer.com / info@thespysurfer.com 11/15Jan 10, 2017
SPY4ALL (blue) applied on the Nikkei 225 Index (red) since 1984
Reduced MaxDD by almost 34% (more puke)
Increased both CAGR and MAR in this case

12. www.thespysurfer.com / info@thespysurfer.com 12/15Jan 10, 2017
SMA-50d/100d/200d applied on <GuessWhat> since 2011
Reduced MaxDD by almost 15% (still a lot more puke)
Increased both CAGR and MAR in these cases

13. www.thespysurfer.com / info@thespysurfer.com 13/15Jan 10, 2017
Plan / Execute / Get Punched / Survive / Learn / Repeat
Thank You!

14. www.thespysurfer.com / info@thespysurfer.com 14/15Jan 10, 2017
DEFINITION of 'MAR Ratio'
The MAR Ratio = Compound Annual Growth Rate (CAGR) / Max DrawDown (MaxDD)
The higher the ratio, the better the risk-adjusted returns
The MAR Ratio gets its name from the Managed Accounts Report newsletter
BREAKING DOWN 'MAR Ratio'
Fund A: CAGR = 30%, MaxDD =15%, then MAR = 2
Fund B: CAGR = 35%, MaxDD =20%, then MAR = 1.75
Fund A would be deemed to be superior because of its higher MAR Ratio
Source: Investopedia

15. www.thespysurfer.com / info@thespysurfer.com 15/15Jan 10, 2017
Simple Moving Average - SMA