Intro to rules based Investing – Why follow an investment strategy?

1. Basics What is rules based Investing? In rules-based-investing we define a clear set of rules. These rules comprise an investment strategy. Here is an example strategy: “At the first day of the month, look at the performance of bonds versus stocks by calulating the 3-month performances of two exchange traded funds, SPY (the SPDR …

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Day of month effect on rebalancing a portfolio

In this post we will:

  1. Take a look at a simple, momentum based, monthly rebalanced Equity/Bond portfolio consisting of two ETFs: SPY and TLT.
  2. Search for what has been the optimal dates in the month to rebalance such a portfolio.

Each month we allocate to SPY and TLT.

If SPY has outperformed  TLT we rebalance to 60% SPY – 40% TLT.

If TLT has outperformed  SPY we rebalance to 20% SPY – 80% TLT.

For the first run we will re-balance on the first of the month and close at the last day of the month.

Rebalancing portfolio 1st day

Now will try different combinations of entry and exit days.

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