The iQ Equity ETF Growth Model
Investment Objective
The iQ Equity ETF Growth Model seeks capital appreciation by rotating among a curated set of 25 U.S. equity ETFs — spanning all major sectors, market cap segments, and select thematic areas — and holding only those with the strongest near-term momentum and the most compelling risk-adjusted performance. The model reconstitutes every February, May, August, and November.
Investment Process
The The iQ Equity ETF Growth Model draws from a focused universe of 25 equity ETFs covering U.S. sectors, broad market indices, and thematic areas:
Sectors: Consumer Discretionary (XLY), Consumer Staples (XLP), Energy (XLE), Financials (XLF), Healthcare (XLV), Industrials (XLI), Materials (XLB), Real Estate (IYR), Utilities (XLU) | Broad Market: S&P 500 (SPY), Nasdaq 100 (QQQ), S&P 400 Mid Cap (MDY), S&P 500 Growth (IVW), Dow Jones Industrial Average (DIA), Micro Cap (IWC) | Small Cap: S&P 600 Growth (IJT), S&P 600 Value (IJS) | Thematic: Semiconductors (SMH), Biotech (IBB), Aerospace & Defense (PPA), Banks (KBE), Gold Miners (GDX), Energy Infrastructure/MLPs (AMLP), Internet (FDN), Nasdaq Next Generation (VNQ)
Two independent passes run across this universe:
Stochastic Momentum: ETFs are ranked by 3-period stochastic and the top 5 advance — capturing those with the strongest immediate price momentum.
Relative Strength + Alpha: ETFs are ranked by 9-period relative strength, the top 15 advance, and then the bottom 5 by 24-period alpha are selected — identifying ETFs with strong recent momentum that have not yet fully priced in their longer-term outperformance potential.
The final portfolio holds up to 5 ETFs drawn from the 85th percentile of the combined ranking.
Potential Advantages
The universe strikes a deliberate balance between breadth and focus. Broad market and sector ETFs provide the stable core; thematic ETFs like Semiconductors (SMH), Biotech (IBB), and Internet (FDN) give the model access to pockets of the market that can generate outsized returns when their underlying themes are in favor. By including both, the The iQ Equity ETF Growth Model is not limited to index-level performance but is not chasing speculative niches either.
The two-pass structure gives the selection real texture. The stochastic pass finds what is moving right now. The relative strength plus alpha pass finds what has been outperforming on a sustained basis but where the alpha still has room to run. Together they favor ETFs with momentum that is both current and durable. The hold-until-top-15 buffer rule keeps the portfolio stable, avoiding the constant churn that undermines many momentum-based strategies.
Potential Risks: A momentum-driven model will always be somewhat late to a rotation — confirmed strength means some of the move has already happened. In fast-shifting markets, the quarterly reconstitution and the top-15 buffer rule can leave deteriorating positions in the portfolio longer than a more reactive process would allow. Thematic ETFs like Gold Miners (GDX) and Energy Infrastructure (AMLP) can be highly volatile and cyclical, and when they are in favor the model may concentrate there in ways that feel uncomfortable relative to a broad equity benchmark.