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Dual ETF Momentum September 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 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 an 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: (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. D isclosure: None. Share this article with a colleague

A New Event Debt ETF Filed By Eccles Street – ETF News And Commentary

A wide variety of products have been launched in the ETF world so far this year by several providers, big and small. Continuing this trend, Eccles Street Asset Management, which is a new player in the industry, looks to launch an active ETF targeting the fixed income ETF space. After all, every player is in a mad rush to tap the income/yields space, thanks to the global growth worries and the subsequent plunge in yields. The Proposed ETF in Focus Eccles Street Event Driven Opportunities ETF revolves around corporate bonds and bank loans having average portfolio duration of about 3-5 years, per the prospectus . Underlying securities will have maturity period within the same time range. The instruments are touted as “event-driven” as these revolve around corporate events. The Eccles Street Event Driven Opportunity ETF will also invest in equities, especially credit-related ETFs and ETNs. How Do These Fit in a Portfolio? The product could be an interesting choice for investors seeking a play in the bond market, which zeros in on high yielding securities. These products are for investors who wish to stay away from stock market volatility while at the same time seek a steady stream of cash flow from their portfolio. Moreover, these products also provide a big jump in yields as compared to treasuries when interest rates remain low. In the current environment, yield hungry investors view high yield corporate bonds as good sources to maximize current income in the form of interest, especially compared to other avenues which have low yields attached. Further, the short-to-intermediate span of the corporate bonds makes the ETF moderately interest-sensitive. With the Fed looking steadfast in its plan to raise the key rate this year, the shorter-end of the yield curve appears dicey. In such a backdrop, the intermediate-term bond ETFs might turn out as good picks. This is not the end though. The issuer is expected to choose less than investment grade securities, but the strengthening of corporate America should provide some cushion against default risks (read: 3 Ultra Safe Bond ETFs to Dodge Market Turmoil ). ETF Competition Peer pressure is presumably tough in the corporate bond ETF space. iShares iBoxx $ Investment Grade Corporate Bond Fund (NYSEARCA: LQD ) heads the space in terms of assets. The fund manages an asset base of over $20 billion, while charging investors just 15 basis points as fees. The fund has returned about 3% so far this year and has a yield of 3.03% (as of January 29, 2015) (read: Best and Worst Bond ETFs Of 2014 ). Another popular choice in the intermediate corporate bond ETF space that could be a threat to the newly filed product is iShares Intermediate Credit Bond ETF (NYSEARCA: CIU ) with an asset base of $6.36 billion. Yield-wise, SPDR Barclays Capital Long Term Corporate Bond ETF (NYSEARCA: LWC ) comes at the top producing 3.74% (as of January 29, 2015) (read: 3 Income ETFs to Watch if Rates Stay Low ). Thus, to garner enough investor confidence, the issuer needs to price its product competitively. The issuer also needs to watch that the yield factor – the main agenda of the product – is competitive.