The iM-USMV Investor Portfolio consists of the four quarterly displaced Best12(USMV)-Investor models at iMarketSignals. The purpose of the combination model is to check whether our hypothesis – ranking the holdings of USMV, the iShares MSCI USA Minimum Volatility ETF, and selecting a portfolio of the 12 top ranked stocks, provides higher returns for the portfolio than for the underlying ETF – is supported by the actual performances of the model over longer period of time.
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The backtest reported in this article showed that ranking the holdings of USMV, the iShares MSCI USA Minimum Volatility ETF, and selecting a portfolio of the 12 top ranked stocks, provided higher returns for the buy&hold portfolio than for the underlying ETF. To test these findings out-of-sample we launched the Best12(USMV)-July-2014on Jun-30-2014 and the first sister model Best12(USMV)-Oct-2014 on Sep-29-2014. Holdings and performance have been published weekly on our website since then. So far to Dec-15-2014 these portfolios have gained 19.2% (6.8%) and 10.5% (5.3%), respectively. (USMV gains are in brackets.) The test will be expanded by the launch on Jan-5-2015 of the second of the three sister models quarterly displaced, the Best12(USMV)-Jan-2015, which again will consist of the 12 highest ranked stocks of the then point-in-time holdings of USMV.
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Ranking the holdings of the Vanguard Dividend Growth Fund VDIGX and selecting a portfolio of the highest ten ranked stocks provided much higher returns for the portfolio than for the underlying fund. A simulation over the time period (6/30/14 to 12/8/14) which selects periodically the 10 highest ranked stocks shows a 15.3% return while VDIGX gained 7.0%.
Since end of June 2014 we provided updates of our Best12(USMV) at iM, a tax efficient model which holds positions normally for at least one year. Concurrently we were testing the Best12(USMV)-Trader model. The only difference between the two models is that the Trader is not restricted to hold stocks for a 1-year minimum period and has an additional sell rule based on rank. We backtested the Trader for various periods and found its returns to be to be marginally higher than that of the tax efficient Best12(USMV) model. However, returns were more consistent.
Three months ago we introduced the iM-Best12(USMV) model, which still holds the then twelve best ranked stocks selected from the holdings of USMV, the iShares MSCI USA Minimum Volatility ETF. So far this portfolio has gained 8.2%, while USMV is up a mere 2.2%, confirming the results of the backtest performed over a relative short period. The out-of-sample test will be expanded by the launch of the second of three sister models quarterly displaced, the Best12(USMV)-Oct-2014, which again will consist of the 12 highest ranked stocks of the then point-in-time holdings of USMV.