UltimateSavings Trading Strategy

Monthly Performance

Benchmark Performance

Performance Note
Performance is as of November 30, 2018

Strategy Type
Discretionary

Benchmark
VBINX - Vanguard Balanced Index Fund (60% stocks/40% bonds)

Holding Period
Long Term - for multiple weeks and months.

Signal Evaluation
Signals are evaluated once a day. One or more trades per day may be executed. Most days there will be no trades.

Strategy Advisor
Stephen Aniston

Active Period
Jan 1st, 2016 - present

Risk Profile
This a risk-averse, low-volatility, very conservative savings strategy that is suitable for all investors. The strategy is expected to outperform in years when the market struggles. In good market years, the strategy is expected to market-perform or slighthly underperform. Generally speaking, we put winnings from our more volatile strategies into this savings strategy over time to reduce risk and preserve gains. This savings strategy can completely replace the Vanguard Balanced Portfolio as its expect to provide similar to higher returns for lower risk.

Strategy Description
This is a strategy that seeks to grow savings in a risk averse fashion. The strategy is benchmarked against a 60% stocks / 40% bonds balanced portfolio as provided by Vanguard which is what most 401(k) desire to emulate. We eliminate risk by spending downturns in the stock market in cash equivalent investments or other defensive investing options. For cash equivalent investment, we use short-term Treasury Notes with duration less than 1 year (SHV) which have earned as high as 5-6% per year in the past. The strategy is inspired by the "Permanent Portfolio" strategy which invests in stocks, long-term bonds, gold and cash. In this strategy, we invest in the S&P 500 (SPY), short volatility (SVXY), gold and gold miners (GLD/GDX), SHV (short-term bonds), TLT (long-term bonds), IEF (medium-term bonds), HYG (high yield bonds), or various SPX sector ETFs such as Energy (XLE) or Tech (XLK) or Financials (XLF) whenever we think these would benefit in excess of the market from some macroeconomic driver. The general rules for the strategy are:

  1. Invest in the S&P 500 ETF (SPY) or Short Volatility ETF (SVXY) once volatility (VIX) starts a secular decline after an SPX correction or a broader economic downturn
  2. Once volatility (VIX) starts a secular rise, invest in cash equivalents or defensives options.
    1. If the FED is projected to increase short term rates aggressively, the strategy may invest in short-term bond ETF (SHV)
    2. If the US dollar gets really weak (below 90), interest rates are very low or projected to decline and cash is at risk of being devalued by inflation, the strategy will seek to protect against inflation with investments in Gold (GLD), Gold Miners (GDX), energy (XLE) and High Yield/Junk Bonds (HYG) if yields on those are high enough.
    3. At the start of serious decline in the SPX and if the FED is projected to lower short term rates aggressively to fight recession (which hurts cash yields), the strategy may invest in long-term bond ETF (TLT) or medium term bond ETF (IEF)
  3. The strategy will generally not invest in "geared" ETFs (ones that carry leverage), but if volatility is projected to be very low (VIX below 12) for an extended period of time, a 2x leverage SPX ETF like SSO might be considered. But this is very rare.
  4. The strategy will invest in quarter lots (25%), half lots (50%) or full lots (100%). At any given time the strategy may have at most 4 different investments. The strategy is designed to be easy to track and implement.

Trading Account Considerations
The strategy targets basic 401(k) trading account without margin. Because multiple buys and sells don't happen on the same day, we assume buy and sells can be immediate and are not subject to a 3 day settlement. No slippage is assumed. A trading fee of $7.50 per transaction is assumed. Any portfolio cash is assumed to generate 0% return even though that is often not the case in practice. The initial amount for the strategy is $100,000.

Disclaimer
Prior performance does not guarantee future returns. There are no backtests for this strategy as it is a discretionary strategy.

Black Peak Ventures does not provide professional financial investment advice specific to your life situation. UltimateSavings is an investment strategy that may not be suitable for your life situation.