Update: 12% Solution Strategy April 2019

Update: 12% Solution Strategy April 2019

April 6, 2019 0 By Jeremy


Rules-Based Strategy Update: 12% Solution Portfolio April 2019

Here is the April 2019 update for the 12% Solution. The 12% Solution is based David Alan Carter’s. The portfolio is divided into 60% equities and 40% bonds, and momentum is used to determine which assets to buy in each allocation. For a more robust overview of the strategy, please check out this post.

You can continue to see the progress results of this system by subscribing to the Robotic Investing newsletter. I will email you whenever a new post goes live, including all of the strategy updates I track on the site.

12% Solution Rules-Based Investing

The most important thing to remember is that the portfolio needs to be divided into two sections. 60% is allocated to equities and 40% is allocated to bonds.

Here are the ETFs that the system trades:

  • IWM – Russell 2000 ETF
  • QQQ – Nasdaq-100 ETF
  • MDY – S&P MidCap 400 ETF
  • SPY – S&P 500 ETF
  • JNK – High Yield Bond ETF
  • TLT – 20+ Year Treasury Bond ETF

Here are the system rules:

  1. The system works by getting into “Risk-On” trades and “Hedge” trades (at the same time). An investor’s portfolio is divided into a 60/40 split, with 60% of the available cash being deployed into the “Risk-On” trade which are equities. The other 40% is invested into “Hedge” trades which are bond ETFs.
  2. With the “Risk-On” trade, the investor buys one of four ETFs. The ETF that is bought has the best month momentum (performance) based on the past 3-months. These four ETFs track different equity portions of the market, so you are effectively buying the strongest trending of the four.
  3. The “Risk-On” trade has a threshold for investing in one of the four ETFs, or in cash. The best performing equity ETF is only bought if it has a positive return in the past 3-months.
  4. If none of the four ETFs pass the threshold, then the equity portion moves completely to cash.
  5. With the “Hedge” allocation of the portfolio the investor buys one of two ETF bond funds. The bond fund that is purchased is the one with the best momentum based on the same period as the equity ETFs.

I encourage readers of this blog to get the book, as David provides all the background and details on using the system.

Monthly Signals: 12% Solution Portfolio

Each month I generate the signals for the portfolio either using Amibroker or TC2000. If you want to give TC2000 a try in order to generate the signals for the strategies on Robotic Investing, then use this link for $25 off.

There is an investment change for April 2019 – the system has moved to 60% QQQ and 40% JNK.

In order to determine that QQQ and JNK are the two holdings, I used Amibroker to do a relative comparison table (3-months). The best performing assets based on the above rules are then purchased.

12% Solution Ranking - Equity - April 2019

12% Solution Ranking - Bond - April 2019

Strategy Tracking & Performance: 12% Solution Portfolio

Here is the portfolio tracker and performance chart for the 12% Solution. The Morningstar Portfolio Tracker is used to track all the systems at Robotic Investing.

This portfolio was started on July 2nd, 2018.

Portfolio Value:

12% Solution Portfolio Value - April 2019

Portfolio Performance:

12% Solution Portfolio Performance - April 2019

Note: Please look at the Total Return value, and not personal return.

I update all of the strategies at Robotic Investing on a monthly basis. If you want to get notified when each strategy is updated, then please consider subscribing to my newsletter. You will only receive emails when posts have been updated.

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Featured Image: Marc Veraart – Kalimantan Borneo