There are few steps to setting up service and getting the full benefit of ETFSharks.
- Select a portfolio to follow
- From the homepage, select "Follow a Strategy"
- Sign in to ETFSharks (if not already signed in)
- Complete the hypothetical transactions to build your model portfolio
- On your Dashboard click rebalance all portfolios
- To be realistic with our strategies enter the market price where you would have purchased each ETF
- Each week rebalance to the new set of ETFs held in the portfolio
- Track your progress
- After about a month, you'll be able to see how your portfolio performs compared to the S&P500.
An investing strategy is a plan of action for investors to use their investable assets to purchase and sell securities to achieve capital appreciation goals. We use the terms â€œInvesting Strategyâ€�, â€œPortfolio (Management) Planâ€� and â€œPortfolio Strategyâ€� rather interchangably. They all mean the same thing on this site.
There are 5 key aspects of every investing strategy here. Each is equally important in the performance of the strategy.
1. Asset Classes - Asset classes include paper financial assets structured in different ways, but all of which include carry risk and are expected to return financial gain to the investor. Examples include equities, bonds, real estate, precious metals, and cash.
2. Markets and Market Sectors - Markets refer to global stock markets. Many of our algorithms invest in funds that track different global stock markets. Market sectors refer to a segment of the market that shares common characteristics in terms of product or industry participants.
3. Model Portfolio - Model portfolio is a collection of assets that comprise all of an investor's holdings at a given time. The model portfolio illustrates the allocation of the investor's capital into a selection of assets at any given time.
4. Asset Allocation Algorithms - Algorithms are mathematical programs that take a set of data inputs, perform calculations and output a model portfolio.
5. Rebalancing Frequency - Rebalancing means taking action. An investor must buy and sell ETFs to align the holdings in their portfolio to the model portfolio. A high rebalancing frequency means that the investor will buy and sell securities more frequently. All of our model portfolios have a fixed rebalancing period of one week.
Carefully constructing algorithms are the secret sauce of an investing strategy. Writing calculations that exploit inefficiencies in the market will make or break a strategy. There are a handful of allocation algorithms that we use in our strategies, and most of our strategies use multiple algorithms.
Like many investors we consider performance metrics like the Sharpe ratio, annualized return, Maximum drawdown, etc. Performance is assessed together and we consider 4 main characteristics when assessing performance:
Stability - Rebalancing means taking action. An investor must buy and sell ETFs to align the holdings in their portfolio to the model portfolio. A high rebalancing frequency means that the investor will buy and sell securities more frequently. All of our model portfolios have a fixed rebalancing period of one week.
Return - Compared to drawdown, ETFSharks prioritizes an annualized return higher than the maximum drawdown of the model portfolio.
Liquidity & Tradeability - Highly liquid ETFs are easier to trade while minimizing slippage. When purchasing highly liquid ETFs the price the trader can obtain a price very close to the desired price meaning that they can put in buy and sell orders and have those orders execute very close to the NBBO.
Diversification - Portfolios that hold fewer assets are easier to trade. Since we rebalance all of our portfolios weekly, when many funds are held in a portfolio we increase the likelihood of execution error and increase the cost of maintaining the portfolio.
We surveyed the landscape of documentation for systematic or algorithmic investing ideas primarily in academic publications. We focused on key trends and promising results documented across multiple authors. Then we combined what we learned into our own models. We will continue to partake in discovery.
ETFSharks tells you which funds to buy and when to rebalance but doesn't do it for you. If you want to trade along with ETFSharks, you'll have to do that on your own. You should be aware of our terms and conditions. We are not recommending you purchase or sell ETFs. We are showing you model portfolios of ETFs. Any action you take is on your own.
No, we do not offer managed accounts.
Please read our terms of service closely. We show you model portfolios that could be traded at most any retail broker. However, we do not make assertions as to the future performance of the models, the accuracy of the data or the availability of the service. This seems limiting, but it's another way we can provide the service at a low cost.
As a registered investment advisor, ETFSharks would operate under increased risk and scrutiny, which in turn would increase the cost of our product for you. We strive to keep the cost of ETFSharks reasonable. Furthermore, everyone's investment situation is different and we wouldn't suggest that conservative investors use strategies like ours. It's up to each investor to weigh the risks and benefits of their investments and we don't want resolve our users of that responsibility.
ETFSharks is in beta testing currently. We're getting the website and email services set up and we'd like to hear your feedback on our service. Please send us your comments. Email us firstname.lastname@example.org.
In order to keep the service simple to understand and easy to follow, we do not create transactions for dividends. We do not track dividends or transaction costs. We've found that reinvested dividends more than make up for the transaction costs in our representation of the portfolios.
We do not estimate dividend payments or transaction costs in portfolio representations. We've found that dividend payments would more than make up for the costs of transactions fees in most retail brokerage accounts. In actual trading, an account would perform better than our models. It's worth noting that our strategy models include dividends. So in a realistic trading scenario an investor would experience actual return between the strategy performance and the portfolio performance. This is rarely more than 0.3% difference over the period of a month.
We define slippage as the negative market impact or effect due to the investor. Essentially, when you buy or sell an ETF you're driving the market price. In highly liquid markets, a small order will not significant price changes. However, in markets with sparse liquidity an order can move the price significantly. We do not account for slippage in our models. In practice, slippage has not been a factor given the small size of the account used in testing the strategies here at ETFSharks. Investors who attempt similar strategies to ours with accounts over $500k in assets will begin to see slippage impacting their ability to get market neutral prices without moving the price of the ETF.
Yes, we're trying to show investors realistic strategies. All of our strategies are meant to be tradeable in accounts smaller than 500k. In fact the creator of ETFSharks trades every strategy we share.
We consider adding or removing funds from your portfolio as "Adjusting your account balance". By adjusting your balance up (simulating depositing) or down (simulating withdrawal), ETFSharks will change the total buy and sell orders for your portfolio based on your current holdings. Adjusting your account balance will not impact previous transaction data.
The site is maintained by a small team of strategists and technology support (Bios coming soon). Because there's not much overhead we're able to move quickly and support our simple but effective product.
We believe in active strategy diversification. Though our site focuses on speculative investment strategies, we believe in a base of cash, bonds and large cap stocks. I think this is what most investment advisors would call a diversified portfolio.