The aggressive portfolio, for investors who can stomach the risk of drawdowns as high as we have seen in the stock market in the past as well as higher short-term fluctuations, aims for returns that beat the stock market over the long term. The defensive portfolio aims to earn the same return as the stock market, but with only half the maximum losses from the peaks over the long term. Both portfolios use the same signals, but invest in different exchange traded funds (ETF) that cover broad markets. I run two model portfolios suited either for normal or more aggressive investors. A traffic light model, that judges the health of the economy and the stock market, determines how much of the portfolio is allocated to these risky assets and when to move to safe or alternative assets to protect against the risk of losses.įind out more details about the Meta Strategy here (oder hier auf deutsch). It is invested in stocks by default, because they return more than other financial assets (for example bonds, real estate or commodities) over the long term. The Meta Strategy uses systematic fundamental and technical inputs to gradually rotate a portfolio between different asset classes according to market conditions. Switch 50% to 2x leveraged S&P 500 ETF hold 50% Gold ETF Portfolio changes Defensive ETF portfolio You can find all recent editions in the Member Area or the pre-04-2020 newsletter archive, including a FAQ section, here. Often gold performs as well as stocks in the early stages after severe economic troubles and the asset will keep us diversified should the economy run into unanticipated problems. Our gold position took a well deserved breather last month and the portfolio was carried by gains in the S&P 500 – the market drop over the last two days pushed this month’s performance down to end 1% in the green.Īs long as fundamentals are not showing a green light, I will keep half of my portfolio in gold to diversify my portfolio. On the contrary, I will now use the pullback to switch the equity allocation in the aggressive portfolio from a regular to a leveraged S&P 500 ETF as the long-term outlook continues to be positive. The current correction is overdue, normal and a long way from triggering an exit from the stock market. The Meta Strategy indicators signaled the change to a bull market regime on July 10th while fundamental economic improvement is still lagging behind. This has materialized last week in a very quick sell-off, that is likely to continue for a while longer. Meanwhile we see data indicating increased risk because of excessive speculation and market anomalies that have surpassed even the records of the year 2000. While the economy is recovering from extremely depressed levels and is still facing severe headwinds in the ongoing pandemic, the stock market shoots up in the fastest recovery to new all-time-highs in US history. The year 2020 will go down in history as one of the strangest ever – in markets as well as in real life.
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