iQ International ETF Rotation Model
A Technical Risk On / Risk Off Approach to International Investing
The iQ International ETF Rotation Model Model applies quantitative monthly technical indicators to ten Exchange-Traded Funds (ETFs) representing countries domiciled outside of North America.
HOW DOES THE MODEL WORK?
Each country ETF represents a 0% - 10% allocation of the total model and is represented by two monthly technical strategies that may dictate a long or cash position in any given month. Each of the two technical strategies per country ETF represents 1/2 of each asset’s allocation.
As an example, if one strategy for a particular country is long while the second strategy for the same country is in cash then the country would have a 5% allocation of the total. If both strategies for a country dictate a cash position, then there will be no allocation to the country. On the flip side, if both strategies are long then the country will represent 10% of the total.
The table below summarizes the country ETF tickers and the potential allocation to each:
| Country | Ticker | Minimum Weight | Maximum Weight | # of Strategies | Minimum Per Strategy | Maximum per Strategy |
|---|---|---|---|---|---|---|
| Australia | EWA | 0% | 10% | 2 | 0% | 5% |
| Brazil | EWZ | 0% | 10% | 2 | 0% | 5% |
| Denmark | EDEN | 0% | 10% | 2 | 0% | 5% |
| France | EWQ | 0% | 10% | 2 | 0% | 5% |
| Germany | EWG | 0% | 10% | 2 | 0% | 5% |
| Japan | EWO | 0% | 10% | 2 | 0% | 5% |
| Korea | EWY | 0% | 10% | 2 | 0% | 5% |
| South Africa | EZA | 0% | 10% | 2 | 0% | 5% |
| Spain | EWP | 0% | 10% | 2 | 0% | 5% |
| United Kingdom | EWU | 0% | 10% | 2 | 0% | 5% |
| Money Market / Equivalent | BIL | 0% | 100% |
The Model reconstitutes monthly as the technical indicators it utilizes are monthly.
The benefits of international ETF momentum strategies
Investing in international ETF momentum strategies can provide several benefits for investors.
Momentum investing involves buying assets that have shown an upward trend in performance and selling assets that have shown a downward trend in performance. When applied to international ETFs, momentum strategies can help investors capture trends in global markets and potentially generate higher returns.
One benefit of investing in international ETF momentum strategies is that they can provide diversification. By investing in a range of international ETFs, investors can gain exposure to different countries and regions, which can help reduce their overall investment risk. In addition, momentum strategies can help investors avoid investments that may be experiencing downward trends or negative news, which can help reduce the risk of losses.
Another benefit of investing in international ETF momentum strategies is the potential for higher returns. By focusing on ETFs that have shown upward trends in performance, investors can potentially capture gains as the trend continues. This can be especially beneficial in rapidly growing markets where traditional value investing strategies may not be as effective.
Overall, investing in international ETF momentum strategies can provide investors with diversification benefits and the potential for higher returns, although it is important to note that, like any investment strategy, there are also risks involved.
*HISTORICAL MODEL PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE RETURNS PRESENTED REPRESENT SIMULATED MODEL RETURNS WHICH ARE HYPOTHETICAL, MEANING THEY DO NOT REPRESENT ACTUAL TRADING, AND, THUS, MAY NOT REFLECT MATERIAL ECONOMIC AND MARKET FACTORS, SUCH AS LIQUIDITY CONSTRAINTS, THAT MAY HAVE HAD AN IMPACT ON ACTUAL DECISION MAKING. THE HYPOTHETICAL PERFORMANCE REFLECTS THE RETROACTIVE APPLICATION OF THE MODEL WITH THE FULL BENEFIT OF HINDSIGHT. Actual performance may result in lower or higher returns than the hypothetical Model performance presented. If actual portfolios had been managed, there can be no guarantee such portfolios would have achieved results similar to those portrayed. Model returns reflect a 0.50% annual trading expense on total portfolio value – which may be higher or lower than actual trading costs. Actual performance will vary from that of investing in the Model because it may not be fully invested at all times. Hypothetical model returns in certain years were significantly higher than the returns of the S&P 500 Index. It is important to note that models may underperform in certain years and may produce negative results. The value of the securities selected by the Model may be subject to steep declines or increased volatility or perception of the issuers.