The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Mechanical Investing


Subject:  Re: Leveraged Sector Rotation Date:  9/17/2020  1:06 PM
Author:  BAGoldmn Number:  279020 of 280103

My actual 3-year returns at Etrade since 2017 are 51% for my sector screen vs. 33% for SPY, and the chart shows that the downdrafts were significantly less for the sector screen.

I use etfscreen to compare the performance of 9 select sector ETFs (XLB,XLE,XLF,XLI,XLK,XLP,XLU,XLV,XLY) with the formula _SMAR2 = SMA-30/SMA-200>1, SORT desc RSf.

I just ran 5-year backtests on etfscreen for that screen and for the equivalent using the leveraged ETFs (CURE,DUSL,FAS,GUSH,NEED,TQQQ,UTSL,UYM,WANT) and got these results:

SPY 13.9 19
SECTOR 13.4 17

So, whoa! Not good. Same CAGR as SPY, but massive increase in volatility.

In comparison, just holding leveraged ETFs yields:

UPRO 25.9 79
TQQQ 52.3 84

So yet again, after decades of trying, my conclusion is KISS: as an individual investor, I can't beat the index. Even so, I think I'll continue to use the basic sector rotation for a corner of my portfolio. Despite what the backtest shows, my actual sector returns beat SPY in recent years (which is probably due to XLK being the top ETF pick for quite some time).

PS. After multiple 403 forbidden errors, updating my windows, rebooting several times, I discovered that you cannot use brackets in these posts. Strange!
Copyright 1996-2021 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us