Update: Supercharged Index Investing May 2019

Update: Supercharged Index Investing May 2019

May 22, 2019 0 By Jeremy


Rules-Based Strategy Update: Supercharged Index Investing May 2019

The Supercharged Index Investing strategy is an evolution of a classic buy and hold equity portfolio. Rather than just buying and holding the S&P 500, the Supercharged Index Investing strategy uses two tweaks to seek additional alpha.

The first tweak is that rather than just using SPY, which is a market-weighted index, the system uses RSP (Invesco S&P 500® Equal Weight ETF). RSP is an equal weighted ETF that which provides equal exposure to all of the stocks in the S&P 500. RSP has had better performance than SPY historically.

RSP is also combined with the mid-cap exposure via MDY (SPDR® S&P MidCap 400 ETF). Mid-caps have also had stronger performance than SPY. The combination of the two produces solid backtest performance, which is why I wanted to test that strategy as part of Robotic Investing.

The final tweak is that a market filter is used to get out of the market if a downtrend develops. Using the 10-month simple moving average, the Supercharged Index Investing sells both MDY and RSP if SPY drops below the moving average line.

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.

Supercharged Index Investing Rules-Based Investing

This portfolio trades based on specific rules that tell the investor what assets to buy and when. Here are the rules of the strategy.

  1. If the SPY is trading above its 10-month simple moving average, buy equal dollar amounts of MDY and RSP.
  2. If SPY drops below the 10-month moving average, then MDY and RSP are both sold and the portfolio goes to cash.
  3. Once SPY breaks above the 10-month moving average again, MDY and RSP are once again purchased and held until the 10-month average is broken again

Very simple system that is easy to trade. Using the market filter lowers drawdowns (see more in this post: Supercharged Index Investing strategy).

Monthly Signals: Supercharged Index Investing

Each month, at the beginning of the month, I generate the signals for the portfolio using TC2000 or Amibroker. 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 was no change for May 2019 – the system is in MDY and RSP.

Using the chart in Amibroker, it is easy to see that the SPY was trading above the 10-month moving average on a monthly chart:

SPY Trend Filter - 10-Month - May 2019

Strategy Tracking & Performance: Supercharged Index Investing

Here is the portfolio tracker and performance chart for Supercharged Index Investing. I use the Morningstar Portfolio Tracker to track all the systems at Robotic Investing. As you can see the strategy lagged the S&P500 a bit over the month, but let’s give it more time to see how it really does.

This portfolio was started on July 2nd, 2018.

Portfolio Value:

Supercharged Index Investing Portfolio Value - May 2019

Portfolio Performance:

Supercharged Index Investing Portfolio Performance - May 2019

Note: When reviewing the performance chart, compare only the Total Return to the Index return. The personal return is inaccurate due to how Morningstar handles cash.

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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