These licensable indexes are designed to help professional fund managers deliver the state-of-the-art performance expected by their clients utilizing tactical risk mitigation and improved low-noise momentum selections.
The performance of cars and telephones has improved considerably since Modern Portfolio Theory (MPT) was developed in 1952. Yet MPT’s simplistic “diversify-and-rebalance” mantra remains dominant in the industry. Technology advances occur when additional underlying problems are identified and solved. Since the advent of MPT, we've come to know that (1) there is momentum in market data, (2) noise in market data disrupts the momentum signal and reduces the quality of investment choices, (3) there are known methods for noise reduction, (4) bear markets are different from bull markets, (5) there are multiple forms of hindsight bias, (6) AI tools can both produce and reduce hindsight bias, and (7) risk is not a one-dimensional problem cured by a single dose of diversification. It’s a multidimensional problem, and diversification’s passive risk dilution is only just the start.
SumGrowth Indexes are based on Temporal Portfolio Theory (TPT), a significant extension to MPT that additionally employs temporal (time-based) market data and the cross-disciplinary sciences of Matched Filter Theory, Differential Signal Processing, Adaptive Filtering, Fuzzy Logic, and others. These are the same tools that have enabled WiFi, USB, iPhones, digital TV, assembly robots, and remotely controlled rovers on Mars to perform so well.
"If you want different results, do not do the same things." A. Einstein
While most Indexes focus on a specific slice of the market, such as a particular sector, factor, theme, or asset class, our Indexes are complete, self-contained tactical portfolio management systems that evaluate dozens of ETFs each month and select a portfolio that seeks to provide the five things investors want most.
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Keep It Simple Strategies are composed of a single broad market index ETF (such as SPY) and employ our critical Dual Defense methodology (StormGuard and TrendGuard) to "know when to hold and when to fold.” It’s that simple! With about three trades per year, half the risk, and twice the return, what’s not to like?
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While most NQ (taxable account) funds lay fallow because active trading leads to short-term capital gains taxes, NQ ETF Indexes are complete self-contained tactical portfolio management systems in a tax-efficient, exchange-in-kind, ETF wrapper. They pursue tactical momentum and risk mitigation strategies internally while delivering long-term capital gains benefits externally.
Genetic Algorithms are a form of AI employed by these Indexes to continuously evolve a set of candidate ETFs associated with each of the 12 competing Models underlying each of the primary thematic categories (that make final fund selections), wherein they seek to adapt the portfolio selections to the ever-changing market conditions in order to continuously improve performance.
The NuSector Indexes (in development) will represent a paradigm shift in the design of a new generation of stock-based sector ETFs that will incorporate our well-developed low-noise momentum and tactical risk mitigation signal processing technologies in a manner that substantially moves the needle. We will focus first on the 11 standard GICS economic sectors. Please weigh-in if interested.
This set of five HyperHedge portfolios was designed with hedge fund managers in mind. They include a very aggressive Sector Nectar Max Index, a Rising Star Stocks Index, a 3X leveraged Pedal to the Metal Index, and two blended indexes that result in a broad set of options for a wide range of investment objectives. In all cases, downside risk mitigation (hedging) is Job-1.
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AlphaDroid investment Strategies and Portfolios level the playing field with Wall Street by putting the power of award-winning, high-performance investment algorithms in your hands. Select from among our many readymade Models, or create and edit Strategies and Portfolios of your own design to better address specific client needs.
Risk is not a trivial problem cured by an ordinary dose of diversification. Our research shows that the most proficient way to reduce risk is through “avoidance” – specifically, avoidance of laggards and bear markets. StormGuard assesses market risk using four key metrics: Price-trend, Market momentum, Value sentiment, and Market volatility.
The performance of momentum investing depends on its proficiency in extracting trend signals from noisy market data. We employ the cross-disciplinary sciences of Matched Filter Theory and Differential Signal Processing – the same technologies that enable WiFi, USB, iPhones, and remotely controlled rovers on Mars to perform so well.
When our StormGuard market direction indicator signals that market conditions have become bearish, its integrated Bear Market Strategy automatically takes charge and substitutes a set of defensive fund candidates and select a momentum leader from among their defensive candidates, such as bond, treasury, and commodity funds.
While StormGuard™ is the first line of defense when market momentum fails, TrendGuard™ acts as a second line of defense by further incorporating a Defensive Backstop Model to compete directly for momentum leadership with the Model Portfolio’s candidate funds in order to provide a performance floor if all of the candidate funds are performing poorly.
Merlyn.AI employs genetic algorithms to evolve competing sets of ETF models from which momentum-leading ETFs are identified in a manner that eliminates hindsight selection bias, and our Forward-Walk Progressive-Tuning methodology adaptively tunes our momentum filters – all of which improve the selection of momentum leaders.
Conquering the Seven Faces of Risk breaks new ground with its development of Temporal Portfolio Theory as a critically important extension to MPT. The new cross-disciplinary mathematics of electronic signal processing and problem segmentation clarify momentum signals and apply bear market strategies to their separate problem class. Risk avoidance is far superior to ordinary risk dilution.
The Consequences of Month-End vs 1-Year Trading
This study examines the comparative taxation effects on the value of (1) trading defensive-momentum strategies only at month-end, (2) holding defensive-momentum strategy trades for at least one year, or (3) simply owning the S&P500 Index without trading. Specifically, do the ravages of short-term capital gains taxes negate the benefits of more nimble month-end trading?
SumGrowth, SectorSurfer, AlphaDroid, True Sector Rotation, SwanGuard, StormGuard, StormGuard-Armor, Own-the-Bubble, Polymorphic Momentum, SumGrowth Indexes, Temporal Portfolio Theory, Bull-Rider Bear-Fighter, and The Alpha Sheet, are all trademarks of SumGrowth, Inc. Seattle WA 98125. SumGrowth Indexes, SectorSurfer, and AlphaDroid are services of SumGrowth, which is not a registered investment advisor and doesn't provide professional financial investment advice specific to anyone in particular. SectorSurfer and AlphaDroid and SumGrowth provide algorithmic strategy analysis tools that produces trade signals according to the set of funds provided for analysis. Strategy performance is hypothetical, based on trading at the market close of trade dates, and does not include associated trading fees or account fees.
SumGrowth Indexes: A service of SumGrowth, Inc.
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SumGrowth Indexes is a trademark of SumGrowth, Inc.
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