RM Portfolios Update: May 2018

Welcome to the May update for the different portfolios which I track at The Rich Moose. I use Canadian-listed ETFs for the models I share to keep the tracking, purchasing, and selling easy for Canadian readers. Only the 3x Leveraged Portfolios use U.S.-listed ETFs.

See the list of my favourite Canadian ETFs on this page.

Vanguard All-in-One Portfolio ETFs

These Vanguard ETFs hold multiple assets inside a single ETF. It's nearly a perfect solution for investors who want to buy just one ETF and hold it forever without worrying about re-balancing, tax trigger issues, and excessive costs. Read my post reviewing these products to get an idea of how they are designed.

Here are the May monthly & year-to-date returns of these portfolio products (benchmark data).

Vanguard Growth ETF
May:  +1.71%
YTD:  +2.36%

Vanguard Balanced ETF
May:  +1.43%
YTD:  +1.75%

Vanguard Conservative ETF
May:  +1.15%
YTD:  +1.12%

The decision between choosing the Growth ETF, Balanced ETF, or Conservative ETF depends on your tolerance for risk and your investment time-line. The Growth ETF should have the highest returns and highest draw-downs over time while the Conservative ETF will show lower returns with more stability. The Balanced ETF is a middle-of-the-road option.

Dual Momentum Strategy (RM Style)

Dual Momentum is a strict, rules-based investing approach which uses an easy performance evaluation to decide your investment holding for each month. Most months the holding will stay the same; trades occur around two times per year on average. By evaluating just once each month, you can eliminate the negative effects of market noise and spend very little time investing.

The Dual Momentum strategy—as tested by Gary Antonacci of Optimal Momentum—has shown fantastic results of complete market cycles. Read his website, book, and research papers to get a full understanding of how the strategy works.

See our version of Dual Momentum performance since 2014 by visiting the Portfolios page.

This month is the third trade of 2018 with another whipsaw. These periods of multiple trades in a row occur every few years in the Dual Momentum strategy. It's normal and always followed by a long period of stability in a single asset class. In June we're back to U.S. stocks with XUU.TO.

YTD Performance:  +0.31%
Last month's performance:  -0.84%
Current recommendation: XUU.TO (trade from XEF.TO)

When determining our monthly position, we consider the past performance of just three eligible holdings: XUU.TO, XEF.TO, VSB.TO. The best performer based on specific criteria becomes the only holding for the next month.

Leveraged Barbell Portfolios

The Leveraged Portfolio strategy uses a unique mix of short-term bonds and leveraged stock ETFs to achieve growth while limiting downside risks. It's essentially a barbell strategy where all the risk and growth is contained in a small portion of the entire portfolio.

If you choose to implement the strategy, make sure you treat each account as a whole portfolio. Do not put bonds in one account and leveraged stock ETFs in another account!

Leveraged portfolios are re-balanced just once per year. For this reason, I will always track the Year-to-Date returns only.

Canadian-listed ETFs (2x Leverage Stock ETFs)

HSU.TO (50%) & XSB.TO (50%):  +0.32%
HSU.TO (30%) & XSB.TO (70%):  +0.30%

U.S.-listed ETFs (3x Leverage Stock ETFs)

UPRO (40%) & BSV (60%):  -0.38%
UPRO (30%) & BSV (70%):  -0.39%

These allocations are just a few examples of how Leveraged Portfolios can work. Leveraged ETFs amplify positive and negative returns so they should always be paired with low-risk assets to meet your personal risk tolerance. In a non-registered account, you may use margin debt to purchase your stock index ETF for somewhat better tracking.

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