Keystone

Keystone

Keystone

The Keystone model is Portfolio Cafe’s flagship model.  It is designed to be the core holding within many types of portfolios and should fulfill the needs of many different types of investors.

Total Portfolio Solution

Our goal:  To create a single model that would be ideal for retirement planning and long-term financial planning and serve as the foundation or cornerstone to a diversified portfolio.

The research:Risk Premia Harvesting Through Momentum”, by Gary Antonnaci.

The factors:

  • absolute momentum
  • dual momentum
  • volatility

The process:  Combine eight separate rules-based systems representing sectors, styles, developed countries, emerging markets, credit markets, real estate, and commodities.

The result:  A dynamic, diversified portfolio, measured by low volatility and remarkably high growth suitable for the “core” component of almost any portfolio.

 

 

The model can be fully invested in up to 14 ETFs when market conditions are favorable but also has the flexibility to be fully invested in cash or short-term securities during down markets by using our “downside risk protector” strategy.  It is rebalanced monthly.

Morningstar Classification: TACTICAL ALLOCATION

Definitions

Sharpe Ratio – the average return earned in excess of the risk-free rate.  A higher Sharpe Ration is better

Risk-Free Rate – represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.

Sortino Ratio – another measure of risk that takes into account the downside deviation of the asset.  A higher Sortino Ratio is better.

What is Drawdown?

Drawdown is the measure from the highest high to the lowest low or peak to trough during a specific time period.  It is an important measurement of risk.  A larger drawdown requires a more significant increase in the security to recover.

Volatility measures the change in the price of an investment.  The higher the volatility, the higher the difference between the high and the low of an investment’s price.

The 12 Month Rolling ROR is the compound rate of return for the last 12 months.  The rate of return is the gain or loss on an investment over a specified time period, expressed as a percentage of the investment’s cost.

Sleep Easy

Sleep Easy

Sleep Easy

DYNAMIC TACTICAL ASSET ALLOCATION AMONG A BASKET OF NON-CORRELATED AND MAJOR MARKET ETFS.

Strategy Description

The Sleep Easy model is a global asset allocation model.  It chooses from among six distinct asset classes:  cash, corporate bonds, U.S.stocks, International stocks, Emerging markets, and gold, plus two inverse funds.

It selects the top two scoring ETFs and uses our “downside risk protector” strategy to move into cash or short-term securities when markets are down.

The model is rebalanced monthly.

The Sleep Easy model uses inverse ETFs as a hedge during periods of market weakness.  As a result, it is a good compliment to Focus 3 which does not contain any inverse funds.

Definitions

Sharpe Ratio – the average return earned in excess of the risk-free rate.  A higher Sharpe Ration is better

Risk-Free Rate – represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.

Sortino Ratio – another measure of risk that takes into account the downside deviation of the asset.  A higher Sortino Ratio is better.

What is Drawdown?

Drawdown is the measure from the highest high to the lowest low or peak to trough during a specific time period.  It is an important measurement of risk.  A larger drawdown requires a more significant increase in the security to recover.

Volatility measures the change in the price of an investment.  The higher the volatility, the higher the difference between the high and the low of an investment’s price.

The 12 Month Rolling ROR is the compound rate of return for the last 12 months.  The rate of return is the gain or loss on an investment over a specified time period, expressed as a percentage of the investment’s cost.

Vanguard Tactical Asset Allocation

Vanguard Tactical Asset Allocation

Vanguard Tactical

VANGUARD ETFs HAVE SOME OF THE LOWEST EXPENSE RATIOS IN THE INDUSTRY, AND ARE AMONG THE MOST POPULAR FUNDS AMONG INVESTORS.  THIS MODEL USES VANGUARD ETFs EXCLUSIVELY.

Strategy Description

The Vanguard Tactical ETF model starts with a broad cross-section of asset classes: bonds, equities, sectors, real estate, and international equities.

Each month, the ETFs are ranked on a combination of trend, relative momentum, and volatility.  The top three scoring ETFs are then held until the next monthly rebalancing.

During periods of stock market weakness, the model may automatically allocate to cash and short-term bonds in order to protect capital.

Definitions

Sharpe Ratio – the average return earned in excess of the risk-free rate.  A higher Sharpe Ration is better

Risk-Free Rate – represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.

Sortino Ratio – another measure of risk that takes into account the downside deviation of the asset.  A higher Sortino Ratio is better.

What is Drawdown?

Drawdown is the measure from the highest high to the lowest low or peak to trough during a specific time period.  It is an important measurement of risk.  A larger drawdown requires a more significant increase in the security to recover.

Volatility measures the change in the price of an investment.  The higher the volatility, the higher the difference between the high and the low of an investment’s price.

The 12 Month Rolling ROR is the compound rate of return for the last 12 months.  The rate of return is the gain or loss on an investment over a specified time period, expressed as a percentage of the investment’s cost.

Global Tactical Focus Three

Global Tactical Focus Three

Focus 3

THIS MODEL IS INSPIRED BY MEBANE FABER’S EXTENSION OF HIS BASIC GLOBAL TACTICAL ASSET ALLOCATION MODEL.

Strategy Description

The Focus 3 model is a global, rules-based tactical ETF strategy with the objective of long-term capital appreciation while minimizing risk.

The strategy ranks 13 ETFs in different asset classes including:  U.S. stocks, International and Emerging markets, Real Estate, Commodities, Gold, U.S. Treasuries, Corporate, and International Bonds.

The model uses our systematic ranking process to select the top 3 ETFs each month with an absolute return focus.  When conditions are favorable, the model will be fully invested in the top three different markets and may hold significant cash or fixed income positions during unfavorable market conditions.

Definitions

Sharpe Ratio – the average return earned in excess of the risk-free rate.  A higher Sharpe Ration is better

Risk-Free Rate – represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.

Sortino Ratio – another measure of risk that takes into account the downside deviation of the asset.  A higher Sortino Ratio is better.

What is Drawdown?

Drawdown is the measure from the highest high to the lowest low or peak to trough during a specific time period.  It is an important measurement of risk.  A larger drawdown requires a more significant increase in the security to recover.

Volatility measures the change in price of an investment.  The higher the volatility, the higher the difference between the high and the low of an investment’s price.

The 12 Month Rolling ROR is the compound rate of return for the last 12 months.  The rate of return is the gain or loss on an investment over a specified time period, expressed as a percentage of the investment’s cost.