ETF Rotation is built by using both a multi-level screening process and our RAAMPS methodology. We start with the entire universe of ETFs looking for 20 to put on the team. We find the first 9 funds by screening for the highest ranked funds from the matrix. Here we get: small, mid and large cap with combination with growth, value, and quality. We also add an Emerging market fund. This gives us 10 base funds. The remaining 10 funds are thematic and are ranked through a multi-level screening process. Historically they have provided the most Alpha to our model.
Once we have our 20 ETFs on the team we overlay our RAAMPS technology to signal buying and selling signals. When a buy signal is received a fund is initially invested at 5%. We may be 100% invested should we have “buy” signals on 20 funds each having a 5% position in the portfolio. If we have “buy” signals on less than 20 funds, the excess capital will be held in cash as protection. It is possible that we are 100% in cash during severe market corrections.
The RAAMPS process was created to provide asset protection by actively managing the risk of holding a particular stock. RAAMPS uses a unique proprietary four-step process. It first uses fundamentals then technical analysis. We actively manage our portfolios in an attempt to achieve solid returns while also mitigating risk.
We screen potential investments by focusing on specific fundamentals and tendencies. Next, we use our proprietary ranking algorithm to select the strongest stocks within the basket of stocks we received from our screen. We have found that this step provides a significant alpha based on our past performance.
Our portfolios are actively managed using term sentiment trading algorithms. These algorithms initiate buys and sells signals, taking human emotion out of the portfolio management and allowing for the process to be consistent and repeatable, therefore, hopefully making the performance repeatable as well.
Lastly, we refresh each of the portfolios using the steps outlined above. We take out stocks that are not active and/or underperforming and replace them with the strongest stocks as indicated by our screening and ranking process. This helps to increase the likely hood of significant alpha by taking advantage of the sector rotations that occur in the broader markets.