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Dual ETF Momentum Update

Scott’s Investments provides a free “Dual ETF Momentum” spreadsheet, which was originally created in February 2013. The strategy was inspired by a paper written by Gary Antonacci and available on Optimal Momentum . Antonacci’s book, Dual Momentum Investing: An Innovative Strategy for Higher Returns with Lower Risk , also details Dual Momentum as a total portfolio strategy. My Dual ETF Momentum spreadsheet is available here , and the objective is to track four pairs of ETFs and provide an “Invested” signal for the ETF in each pair with the highest relative momentum. Invested signals also require positive absolute momentum, hence the term “Dual Momentum”. Relative momentum is gauged by the 12-month total returns of each ETF. The 12-month total returns of each ETF is also compared to a short-term Treasury ETF (a “cash” filter) in the form of the iShares Barclays 1-3 Treasury Bond ETF (NYSEARCA: SHY ). In order to have an “Invested” signal, the ETF with the highest relative strength must also have 12-month total returns greater than the 12-month total returns of SHY. This is the absolute momentum filter which is detailed in depth by Antonacci, and has historically helped increase risk-adjusted returns. An “average” return signal for each ETF is also available on the spreadsheet. The concept is the same as the 12-month relative momentum. However, the “average” return signal uses the average of the past 3-, 6-, and 12-(“3/6/12”) month total returns for each ETF. The “invested” signal is based on the ETF with the highest relative momentum for the past 3, 6 and 12 months. The ETF with the highest average relative strength must also have average 3/6/12 total returns greater than the 3/6/12 total returns of the cash ETF. Portfolio123 was used to test a similar strategy using the same portfolios and combined momentum score (“3/6/12”). The test results were posted in the 2013 Year in Review and the January 2015 Update . Below are the four portfolios along with current signals. “Risk-Off” is the current theme among all four portfolios: Return Data Provided by Finviz Click to enlarge As an added bonus, the spreadsheet also has four additional sheets using a dual momentum strategy with broker-specific commission-free ETFs for TD Ameritrade, Charles Schwab, Fidelity, and Vanguard. It is important to note that each broker may have additional trade restrictions, and the terms of their commission-free ETFs could change in the future. Disclosure: None.

Long/Short ETFs To Brave This Wild Market

What similarity between summer 2015 and winter 2016! The China-driven sell-off that crushed the global investing world last August-September suddenly starts chiming to start the new year. Basically, a wavering Chinese economy and the consequent burst of the Chinese stock market on the one hand and the Fed policy tightening as well as massive crashes in oil prices on the other sent the global markets into a difficult state. The contagion effect of the double whammy was strong enough to make global equities see the most horrible start to a year in 16 years. Grave economic releases out of China and heightened volatility in its stock market caught the global markets off guard lately. There was a trading halt on the key Chinese bourses, with the indexes diving 7% to start the new year. The decline was the worst single-day performance since the 8.5% decline on August 24, 2015, which was the root of the global market rout last summer. Hints of further shrinkage in the Chinese manufacturing sector in December were held responsible for the bloodbath in the market. The Caixin/Markit Purchasing Managers’ Index (PMI) for China declined to 48.2 in December, representing the 10th successive month of factory output contraction. The data was worse than the prior 48.6 and well below the market’s expectation for 48.9. Additionally, China’s central bank guided the yuan to a five-year low in offshore trading on Wednesday, which raised expectations of further weakness in the Chinese economy as well as sparked off fears of a currency war among export-centric Asian nations. If this was not enough, news of Saudi Arabia cutting off diplomatic ties with Iran joined China-led worries to start the year. While investors somehow started to digest fears of a hard landing in China, things seemed unsteady even in the U.S. Despite the Fed liftoff in December, subdued inflation is still a concern. From this global trend, we can easily say that the macroeconomic environment is anything but steady. Asian shares are approaching their largest weekly decline in over four years . Added to this, oil prices are stubbornly low, having slipped to below $34/barrel level lately on supply glut and global growth worries. The continued downward pressure on oil prices crushed several oil-rich nations during this course. Brent crude tested an 11-year low, while WT has seen a 7-year low in the first week of 2016. For the top U.S. ETFs, investors saw the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) lose over 5.8%, the SPDR Dow Jones Industrial Average ETF (NYSEARCA: DIA ) shed over 6% and the PowerShares QQQ Trust ETF (NASDAQ: QQQ ) move down by 7.5% in the last five trading sessions (as of January 7, 2016). So, it would be wise for investors to settle on safe ETFs while playing the U.S. Safety and value should be the investment mantra in this stormy market. If caution is the keyword, investors can take a look at these three long/short ETFs which beat the aforementioned broader U.S. ETFs in the first week of 2016. QuantShares U.S Market Neutral Anti-Beta ETF (NYSEARCA: BTAL ) Investors who want to shift their focus to investing in low-beta stocks during this uncertain market environment can consider adding BTAL ETF to their portfolio. This fund tracks the Dow Jones U.S. Thematic Market Neutral Anti-Beta Total Return Index, which is an equal-weighted, dollar-neutral, sector-neutral benchmark. The index identifies the lowest-beta stocks and goes long on them, while at the same time going short on the highest-beta stocks. Like MOM, this fund also invests in equal dollar amounts for both the long and short positions, and looks to profit from the spread return between low- and high-beta stocks. This is thin on AUM having amassed just $8.5 million in assets. The fund charges 99 basis points as expenses and gained 4% in the last five trading sessions (as of January 7, 2016). WisdomTree Dynamic Bearish U.S. Equity Fund (NYSEMKT: DYB ) The fund looks to track long equity positions or long U.S. Treasury positions and short equity positions. The long equity positions take care of about 100 U.S. large- and mid-cap stocks that satisfy eligibility criteria and have the best combined score based on fundamental growth and value signals. The stocks are weighted as per their volatility features. The short equity positions comprise the largest 500 U.S. companies designed to act as a market risk hedge. This $1.3-million fund charges 48 bps in fees and added 2.3% in the last five trading sessions (as of January 7, 2016). QuantShares U.S. Market Neutral Momentum ETF (NYSEARCA: MOM ) The fund looks to track the performance of the Dow Jones U.S. Thematic Market Neutral Momentum Index. The target index is equal-weighted, dollar-neutral and sector-neutral. The index takes the highest-momentum stocks into account as long positions and the lowest-momentum stocks as short positions, in almost equal measure within each sector. Thanks to its focus on momentum stocks, this low-volatility ETF offers a nice return even in a bull market. The basket of about 200 stocks that the fund is long on seeks to outperform the portfolio of about 200 stocks with short positions. Despite its solid strategy, the product has so far been overlooked by investors with AUM of $8.4 million. It charges a fee of 1.49% per year from investors and gained about 0.4% in the last one week. Original Post

5 Strong Buy T. Rowe Price Mutual Funds

Founded in 1937 by Thomas Rowe Price, Jr., T. Rowe Price currently manages $725.5 billion worth of assets (as of September 30, 2015). This renowned publicly owned investment management firm manages more than 100 mutual funds across a wide range of categories. Additionally, T. Rowe Price offers other financial services, including a wide variety of investment planning, guidance tools, subadvisory services and retirement plans. With over 5,000 employees and more than 5,900 associates, the company serves clients throughout the globe. Below, we share with you 5 top-rated T. Rowe Price mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy), and is expected to outperform its peers in the future. To view the Zacks Rank and past performance of all T. Rowe Price mutual funds, investors can click here to see the complete list of T. Rowe Price funds. T. Rowe Price Media And Telecommunications Fund No Load (MUTF: PRMTX ) invests a major portion of its assets in securities of companies involved in operations related to media, technology and telecommunications. It primarily invests in common stocks of large- and mid-cap companies. The fund has a three-year annualized return of 15.4%. Paul D. Greene II is the fund manager of PRMTX since 2013. T. Rowe Price Blue Chip Growth Fund No Load (MUTF: TRBCX ) seeks capital appreciation over the long run. The fund invests the lion’s share of its assets in common stocks of growth-oriented blue chip companies. It focuses on acquiring securities of large- and mid-cap companies with strong fundamentals. The T. Rowe Price Blue Chip Growth Fund has a three-year annualized return of 16.3%. TRBCX has an expense ratio of 0.72%, as compared to the category average of 1.18%. T. Rowe Price Capital Appreciation Fund No Load (MUTF: PRWCX ) invests a minimum of half of its assets in stocks. The rest of its assets are expected to get invested in other securities, including convertible securities, debt securities issued by both government and corporate bodies, and bank loans. It may also invest a maximum of 25% of its assets in securities issued in foreign countries. The T. Rowe Price Capital Appreciation Fund has a three-year annualized return of 11.5%. As of September 2015, PRWCX held 265 issues, with 4.21% of its assets invested in Marsh & McLennan Companies Inc. T. Rowe Price Growth and Income Fund No Load (MUTF: PRGIX ) seeks long-term growth of capital and income. It uses bottom-up analysis to invest in both growth and value stocks of companies. To select growth stocks, the fund focuses on companies that are expected to provide above-average growth. The T. Rowe Price Growth and Income Fund has a three-year annualized return of 13.4%. Jeffrey Rottinghaus has been the fund manager of PRMTX since June 1, 2015. T. Rowe Price CA Tax Free Bond Fund No Load (MUTF: PRXCX ) invests a large share of its assets in debt securities that are expected to provide interest income free from federal and California state income taxes. It seeks high tax-exempted income through prudent portfolio management. The T. Rowe Price CA Tax-Free Bond Fund has a three-year annualized return of 4.3%. PRXCX has an expense ratio of 0.49%, as compared to the category average of 0.90%. Original Post