By now you know that the US equity markets, in particular, had a solid 2017. My ETF investment strategy selects five or six ETFs at the end of each month and holds them until the end of the following month when selections are made again.It should be no surprise that my tactical asset allocation style of investing had me hold SPY every month throughout 2017.
Volatility was historically low last year. On average, I used 30% leverage in 2017 but the annualized volatility of my ETF portfolio was almost always below 10%.
I have been asked about my expectations regarding which markets will be the 2018 winners. My style of investing is based, in part, on an understanding that I as an investor do not make predictions. Yes, I can tell you which asset classes are represented in my holdings right now but I can’t tell you how long I will have them. Nor can I make any sort of educated guess regarding how my portfolio will fare overall in 2018. As I alluded to in earlier posts, I consider monthly returns analogous to picking green and red marbles from a bag while blindfolded. My strategy determines if there are more green marbles (positive monthly returns) than red marbles (negative monthly returns) but I have no say in the order the marbles will be picked.
December’s performance was yet another green marble as my portfolio grew by 2.29% giving an overall gain for 2017 of 22.4%. The amazing characteristic of 2017 was the low volatility. If you look at my equity chart below you will see how incredibly smooth it was last year.
My Gain to Pain Ratio is an absurdly high 4.96 due to it being measured over just under two years when the markets have provided solid returns. In the long run, I expect this ratio to lower to between 1.5 and 2.0.
My five ETF holdings for January cover US equities, Asian equities, and energy.