RM Portfolios Update: July 2018

Welcome to the July update for the different portfolios which I track here at The Rich Moose blog. I use Canadian-listed ETFs for the models I share to keep the tracking, purchasing, and selling easy for Canadian readers. However, because they are not available in Canada, I use U.S.-listed ETFs and track returns in U.S. dollars for the Leveraged Barbell Portfolios which use 3x Leveraged 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.

While I personally believe there are better ways to invest when you have a larger investment account, these Vanguard Portfolio ETFs are great for newer investors, people who don't want to spend any time thinking about their investing process, and investors who want to minimize costs that would otherwise use a "robo" advisor or a similar more expensive passive investment approach.

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

Vanguard Growth ETF
July:  +1.17%
YTD:  +4.49%

Vanguard Balanced ETF
July:  +0.76%
YTD:  +3.32%

Vanguard Conservative ETF
July:  +0.35%
YTD:  +2.15%

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.

Averaged 6 & 12 Month Dual Momentum Strategy

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 managing your investments.

I use a very similar version of Dual Momentum in my own personal portfolio. Looking at the history, I think Dual Momentum investors have a good opportunity to have market beating performance with lower drawdowns.

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

See how Averaged 6 & 12 Month Dual Momentum would have performed compared to a buy-and-hold indexing portfolio over the past 5 decades, see the portfolio performance by visiting the Portfolios page.

This month we are staying in U.S. stocks which are very clearly outperforming the rest of the world right now.

YTD Performance:  +4.76%
Last month's performance:  +2.40%
Current recommendation:  XUU.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.

Although I add a trend factor into the analysis for my personal portfolio, the strategy I use in my non-registered account works very similar to this Leveraged Barbell 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%):  +4.28%
HSU.TO (30%) & XSB.TO (70%):  +2.70%

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

UPRO (40%) & BSV (60%):  +4.43%
UPRO (30%) & BSV (70%):  +3.25%

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.

Comments & Questions

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2 Replies to “RM Portfolios Update: July 2018”

  1. Hi,

    Just wanted to say, thanks for a great blogg!
    I’ve noticed that you also use the average 6 month signal in your investment decision, could you possibly provide the formula?

    Thanks in advance!

    1. Daren (Editor) says:

      I use the formula on this page for evaluating Averaged Dual Momentum signals: http://therichmoose.com/portfolios/

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