TuringTrader's Straight Four

Key Facts

  • mean-variance optimization strategy
  • trades U.S. equities, Treasuries, and gold
  • re-balanced monthly

Tags

premium
momentum
etfs
monthly
low-volatility

Summary

Straight Four is a proprietary premium strategy by TuringTrader.com, introduced in December 2020.

Straight Four aims to continuously beat the 60/40 portfolio while avoiding most of the benchmark's downturns. The strategy uses mean-variance optimization to shift its asset allocation between the S&P 500, the NASDAQ, long-term U.S. Treasuries, and gold to achieve this objective.

Straight Four rebalances monthly, typically adjusting the weights of only three ETFs. This schedule equates to very low maintenance requirements, compatible with a busy lifestyle.

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 Straight Four:

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:


- Delayed Data -

Review

Strategy Rules

The operation of Straight Four can be summarized as follows:

  • trade ETFs tracking the S&P 500, the NASDAQ, long-term U.S. Treasuries, and gold
  • evaluate the performance of various asset weights over a lookback period of approximately three months
  • reduce exposure based on historical volatility
  • rebalance once per month, picking the combination with the best modified Sharpe Ratio

Straight Four is a close relative to LogicalInvest's Universal Investment Strategy. We have enhanced the strategy by adding more asset classes and reducing risk exposure through a volatility-overlay.

Diversification

Straight Four diversifies across three major asset classes. This diversification manifests itself in a beta of around 0.4. Even in bullish periods, the portfolio rarely invests much more than 60% in the stock market, keeping the portfolio balanced and well-mannered.

Returns & Volatility

Straight Four beats the 60/40 benchmark in many years and offers additional upside in times of recession. Further, the portfolio wins over the S&P 500 when contemplating the full economic cycle.

The chart above shows how Straight Four's rolling returns exceed those of the 60/40 portfolio in most periods. As a result, Straight Four continually expands its lead over the benchmark.

Account & Tax Considerations

Straight Four trades frequently and regularly triggers taxable events. The portfolio rarely holds assets long enough to qualify for long-term treatment of capital gains. With these properties, the overall tax-burden is undoubtedly higher than for a passive 60/40 portfolio. However, because of its significantly higher returns, Straight Four may still add value to taxable accounts.

Straight Four invests in no more than three ETFs at a time. The strategy should function as intended with as little as $3,000 of capital.