iQ All Assets ETF Model (no inverse)
Why limit yourself to just stocks and bonds?
Go Anywhere…at any time!
The iQUANT.pro All Assets ETF Model (no inverse) rotates between 5 low-correlated asset classes every 3 months based on technical and macro indicators. The Model touts zero correlation to the S&P 500 and should be considered a hedge against whipsaw markets.
The Model was created as a “no inverse ETF” alternative to the original iQ All Assets ETF Model for investment professionals that are unable to utilize inverse ‘40 Act funds.
Process:
The Model utilizes the following repeatable rules-based process:
Begin with a starting universe of the following:
Equities (3 super sectors* and three style boxes)
Currencies (US Dollar & Japanese Yen)
Commodities (Gold, broad Commodity Index)
Bonds (Domestic & Global, High Grade & High Yield)
Sort the starting universe by 7-month price momentum and keep the top 10
Sort the remaining ETFs by their correlation to Oil and keep the bottom 5
Reconstitute every seasonal quarter (Feb, May, Aug, and Nov)
The benefits of an all-assets approach with ETFs
An all-assets approach to investing using ETFs (Exchange-Traded Funds) is a popular and cost-effective way to build a diversified portfolio across a range of asset classes. ETFs are investment funds that trade on an exchange, much like stocks, and offer exposure to a variety of underlying assets.
By investing in a combination of ETFs that track different asset classes, such as stocks, bonds, commodities, and real estate, an investor can create a diversified portfolio that aligns with their investment goals and risk tolerance. Here are some benefits of using ETFs for all-assets investing:
1. Low Cost: ETFs generally have lower management fees compared to mutual funds, making them a cost-effective way to gain exposure to a range of asset classes.
2. Liquidity: ETFs trade on exchanges throughout the day, allowing investors to buy and sell shares easily, providing liquidity that is not found in mutual funds.
3. Diversification: ETFs offer exposure to a variety of asset classes, which can help to spread risk and reduce the impact of any single asset on the overall portfolio.
4. Flexibility: ETFs can be used to implement various investment strategies, including tactical and strategic asset allocation.
5. Transparency: ETFs provide investors with transparency into their holdings and the underlying assets they track, allowing them to make informed investment decisions.
When building an all-assets portfolio using ETFs, it's important to consider factors such as asset allocation, diversification, risk management, and expenses.
Please be aware that all asset hedge strategies involve significant risks and may not be suitable for all investors. These strategies aim to mitigate risk and protect against potential losses, but they do not guarantee profits or prevent market fluctuations. The performance of asset hedge strategies can vary based on market conditions and economic factors. Investors should carefully consider their risk tolerance and financial objectives before adopting any asset hedge strategy.
*Super sectors are an idea introduced by Morningstar that represents the grouping of individual sectors by historical betas. The three super sectors are Defensive, Sensitive, and Cyclical. The Defensive Super Sector includes industries that are relatively immune to economic cycles. These industries provide services that consumers require in both good and bad times, such as health care, consumer staples and utilities. In general, the stocks in these industries have betas of less than 1. The Sensitive Super Sector includes industries that ebb and flow with the overall economy, but not severely so. Sensitive industries fall between the defensive and cyclical industries as they are not immune to a poor economy, but they also may not be as severely impacted by a poor economy as industries in the Cyclical Super Sector. In general, the stocks in these industries have betas that are close to 1 and include the Telecommunications, Energy, Industrial and Technology sectors. The Cyclical Super Sector includes industries significantly impacted by economic shifts. When the economy is prosperous these industries tend to expand, and when the economy is in a downturn these industries tend to shrink. In general, the stocks in these industries have betas of greater than 1 and include the Basic Materials, Financial Services, and Consumer Services sectors.