TuringTrader's Buoy

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Key Facts

  • trend-following strategy
  • including macroeconomic indicators
  • rebalances weekly
  • invests in
    • U.S. treasuries
    • U.S. corporate bonds

Tags

premium
momentum
weekly
etfs
low-volatility

Summary

Buoy is a proprietary premium strategy by TuringTrader.com, introduced in February 2022.

Buoy aims to beat the aggregate bond market continuously while maintaining a similarly low risk profile. The strategy invests in U.S. Treasuries covering a wide range of maturities and U.S. Corporate Bonds of various credit rankings. The strategy trades its universe using Heine's Bond Trading Model to achieve its objective.

Buoy rebalances weekly, resulting in moderate maintenance requirements. Its high returns and low risk profile make the strategy an attractive substitute for buy-and-hold investments in fixed-income securities.

Performance

The chart above shows the portfolio's historical performance and drawdowns, compared to their benchmark, throughout the simulation. The chart below shows the portfolio's annual returns:

This table shows the performance metrics for TuringTrader's Buoy:

Asset Allocation

The portfolio last required rebalancing after the exchange's close on n/a. Due to fluctuations in asset prices and portfolio values, the exact allocations vary daily. The current asset allocation is as follows:


Last updated on .

Review

Strategy Rules

The operation of Buoy can be summarized as follows:

  • consider high-yield bonds, corporate bonds, and U.S. Treasuries with long-term, mid-term, and short-term maturities a universe with a known performance ranking
  • use Heine's Bond Trading Model to determine investability for each asset in the universe
  • in addition, validate high-yield bonds with Market Vane
  • allocate equal capital to the top two investable assets
  • if no investable assets exist, invest in the fallback asset
  • choose TIPS and T-bills as the fallback asset, based on their relative momentum

Diversification

TuringTrader's Buoy strategy ultimately only invests in a single asset class: bonds. However, the strategy employs a level of serial diversification by rotating through a universe of several ETFs representing various segments of the U.S. bond market.

Returns & Volatility

TuringTrader's Buoy strategy provides a continuous upside over the aggregate bond market benchmark. The rolling returns and the tracking chart illustrate this upside. At the same time, the strategy has a risk level that is about on par with its benchmark. This statement is supported by the underwater chart and the Monte-Carlo simulation, even though the standard deviation suggests otherwise. Most importantly, the strategy limits interest rate risks, which is highly relevant in environments of rising rates, as seen in the periods from 2015 to 2018 or from 2021 onward.

Account & Tax Considerations

When the Buoy strategy changes its holdings, it triggers taxable events. Investors should not assume that any assets are held long enough to qualify for long-term treatment of capital gains. However, because interest payments from bonds are taxed with the regular income tax rate, this has only a small effect on the strategy's overall tax burden. Like other bond strategies, Buoy achieves its best results in tax-deferred accounts.

Because the strategy only holds no more than two ETFs, accounts funded with $1,500 or more are sufficient to implement the strategy.