Sunday, February 22, 2015

MODEL 3.2 Beta Version - More Etfs more assets

It's my pleasure to introduce an beta version of model 3 that I'm going to call MODEL 3.2
It's has a correlation about 80% with the "pure" model 3, because the logic of algorithms is the same
Therefore one can decide if use both or just one of them.
Basically there are 3 majors changes:
* 2 more assets (UK Gilts and Asia Pacific dividend shares)
* 1 more ETF each month -  model buys 3 ETFs rather than 2.
* Different time frame to calculate the market strength

Below the results (without including commission and slippage)





What I like is that:
1) again is not hyper-optimazed. I found another model much better with the same idea but I rejected because too optimized. I like that model 3.2 give similar results changing the variables and time frame over the long run, and this mean consistency for me;
2) even if the purchase of 3 ETFs a month means more commissions cost, you add diversification. It's not rare that in one month you see one ETF dropping a lot, compensated (all or almost) by the two.
3) the model invests on all 12 assets in the long term



Summary: this model is still in beta version, meaning I'm not investing real money with it. 
I want to investigate further in coming weeks and then beginning to use it
Must decide if/how combine it with the other three models to find the right weight. I think I'll publish a new post in coming weeks about how to use Markowitz to decide the model allocation.
I am also thinking about a version 3, with up to 5 ETFs each months and 20-30 asset to choose. But have to think how to filter correlations with a bigger number.
ALLOCATION: in January model selected  Treasury 7-10y, Euro govies 15-30 ad UK Gilts. January allocation was confirmed for February and this month lost some of January gain so far.


No comments:

Post a Comment