The following Tranche Recommendations use the following assumptions.
- Ten (10) ETFs plus SHY are used to create this data. The ETFs are identical to those used in the “Rutherford 10”.
- The number of Offset Portfolios is set to eight (8). Twelve (12) is the maximum number possible.
- Periods between Offsets = 2.
- ROC1 = 30% and ROC2 = 50% with Volatility set to 20%. These are the percentages recommended from numerous back-tests.
Tranche Recommendations: If the offset portfolios were set to one instead of eight, the portfolio would be divided into thirds where 1/3 goes to SHY, 1/3 to TLT, and 1/3 to PCY. With the offsets set to eight (8) we buy 1000 shares of SHY, 80 shares of TLT, and 150 shares of PCY. Those orders would be placed today, not spread out over some future period. When possible, I prefer to buy in round lots so I would set an order for 100 shares of TLT, 200 shares of PCY, and then reduce the number of shares of SHY to a round lot depending on available cash.
At this point there are two options. We can wait another 33 days until the next review period or we can watch the changes on a daily basis. I prefer to wait so as to avoid unnecessary portfolio churning and possible whipsaws. All three suggested ETFs are “conservative” so I would watch to see if any equity ETFs moved from below to above SHY in performance. Say VNQ made a positive move and showed up performing better than SHY. At this point I would likely sell off sufficient shares of SHY and buy 100 shares of VNQ. For this to happen, I want to see a positive absolute acceleration and a positive “Golden Cross” from VNQ. Right now, all conditions to buy VNQ are in place with exception of outperforming SHY. VNQ needs to move up a few slots in order to become a favored ETF.
This is an additional help session in the use of the Tranche 1.6 spreadsheet.