Hi, I try yo backtest your smart strategy but I run in two issues: some etf were not quoted before 2011, and my cagr is align with sp, alit bit less.Where I may be wrong?Thanks
Hi Albert. My system is based on the real indices and not on any specific ETF implementation. I'm not sure what you backtested, as the exact algorithm is proprietary and I haven't published it anywhere :) So, I can't offer help with backtesting, but I provide the exact output to paid subscribers.
Hi there, sure you are right.The point was just that I backtested with the present etf all the possible combination and only the most aggressive arrive to the return of the Sp.So numbers don't lie.
Just became a paying subscriber and going to follow your strategy.
I'm trying to find distributing ETFs in GBP that I can use as part of your strategy, since distributing ETFs simplify tax handling in the UK.
I wasn't able to find such alternatives for many of the indexes you track, but found for several sectors:
Consumer Staples - IE00BGQYRQ28 - MSCI USA Consumer Staples index
Energy - IE00BCHWNS19 - MSCI USA Energy 20/35 Custom Index
Health Care - IE00BCHWNW54 - MSCI USA Health Care index
Information Technology - IE00BGQYRS42 - MSCI USA Information Technology 20/35 Custom
Index
These are not the same indexes, but from what I see are very similar. Do you think that these indexes are similar enough, or should I better use the ones you listed?
From what I can see, the MSCI USA sector indices are very close the S&P 500 sector indices I use. They include more small companies, but they are really small in size.
I can’t give personal advice, but they seem very close to me. Just be aware that returns may be slightly different (up or down) but just slightly :)
Only that iShares tends to provide the largest (most liquid) ETFs, at least on the European market. But other providers can be equally good or better. What matters is which index they track and the daily liquidity.
Hi MarketFighter, like your strategy. Is it a problem if i trade one of the EU ETFs in Italy instead of on Xetra if my broker doesn't offer the Xetra option? Also, the volumes can be low on some of the EU ETfs on Xetra, which might be a issue if one wants to invest a more significant sum and you need to switch once a month? How do you view that?
Hi Lucas. It shouldn't matter which exchange you use. What matters is just the underlying index, if you want to follow the strategy.
And you're right about the volumes on Xetra. I trade the ETFs there myself, and I do have to be a bit patient sometimes. It hasn't been a problem to complete the trades, though. It seems there's some sort of marker-maker to make sure enough shares are always available for selling and buying.
Hi MarketFighter. I like your strategy. I tried to duplicate with Etfreplay site but can't seem to get a better CAGR or Sharpe Ratio than pure SPY. I'm using 6 month+12 month lookback relative strength. I'm using USA tickers, monthly rotation.
You will of course see different returns without the specific lookback I'm using. Also, comparing to SPY is different from comparing to the world index, as the S&P 500 has massively outperformed during the period from 2009 to 2025. I like to keep the strategy global, as nobody knows if US stocks will continue to outperform or reverse to the mean :-) Finally, you will have worse drawdowns without the proprietary drawdown protection layer I'm adding.
But still, even with these limitations you should be able to get a positive alpha over long time horizons. What was your process for backtesting the sector basket and the factor basket and then combining them? And what was the time period for your backtest? Just asking out of curiosity 😊
Yes, it's likely your proprietary drawdown strategy makes a big difference. ETFREPLAY uses total return ETF data. For relative strength selection, I used 50% 6-month/50% 12-month lookback period to choose the top sector and top factor. Perhaps other timeframes work better. For the 10 year period, I did get slightly better Sharpe .73 vs .65 using VT as the benchmark.
For drawdown, with ETFREPLAY, it goes to cash if the top sector/factor is below its own 10-month moving average. Yours is probably more effective than that.
Hi! The annual expense ratios of the vast majority of these ETFs are between 0.08% and 0.25%. There are a few exceptions around 0.40%, but that's it.
Remember, these fees don't accumulate with every ETF you buy and sell. It's the total drag across a full year. The total annual drag from expense ratios for this strategy is typically around 0.15% to 0.20%.
Hi, I try yo backtest your smart strategy but I run in two issues: some etf were not quoted before 2011, and my cagr is align with sp, alit bit less.Where I may be wrong?Thanks
Hi Albert. My system is based on the real indices and not on any specific ETF implementation. I'm not sure what you backtested, as the exact algorithm is proprietary and I haven't published it anywhere :) So, I can't offer help with backtesting, but I provide the exact output to paid subscribers.
Hi there, sure you are right.The point was just that I backtested with the present etf all the possible combination and only the most aggressive arrive to the return of the Sp.So numbers don't lie.
Just became a paying subscriber and going to follow your strategy.
I'm trying to find distributing ETFs in GBP that I can use as part of your strategy, since distributing ETFs simplify tax handling in the UK.
I wasn't able to find such alternatives for many of the indexes you track, but found for several sectors:
Consumer Staples - IE00BGQYRQ28 - MSCI USA Consumer Staples index
Energy - IE00BCHWNS19 - MSCI USA Energy 20/35 Custom Index
Health Care - IE00BCHWNW54 - MSCI USA Health Care index
Information Technology - IE00BGQYRS42 - MSCI USA Information Technology 20/35 Custom
Index
These are not the same indexes, but from what I see are very similar. Do you think that these indexes are similar enough, or should I better use the ones you listed?
Thank you
Welcome on board Leonid, and thanks for joining!
From what I can see, the MSCI USA sector indices are very close the S&P 500 sector indices I use. They include more small companies, but they are really small in size.
I can’t give personal advice, but they seem very close to me. Just be aware that returns may be slightly different (up or down) but just slightly :)
Thanks
Any particular reason why you choose ishares over other providers?
Only that iShares tends to provide the largest (most liquid) ETFs, at least on the European market. But other providers can be equally good or better. What matters is which index they track and the daily liquidity.
Thanks, that makes sense!
Hi MarketFighter, like your strategy. Is it a problem if i trade one of the EU ETFs in Italy instead of on Xetra if my broker doesn't offer the Xetra option? Also, the volumes can be low on some of the EU ETfs on Xetra, which might be a issue if one wants to invest a more significant sum and you need to switch once a month? How do you view that?
Hi Lucas. It shouldn't matter which exchange you use. What matters is just the underlying index, if you want to follow the strategy.
And you're right about the volumes on Xetra. I trade the ETFs there myself, and I do have to be a bit patient sometimes. It hasn't been a problem to complete the trades, though. It seems there's some sort of marker-maker to make sure enough shares are always available for selling and buying.
Hi MarketFighter. I like your strategy. I tried to duplicate with Etfreplay site but can't seem to get a better CAGR or Sharpe Ratio than pure SPY. I'm using 6 month+12 month lookback relative strength. I'm using USA tickers, monthly rotation.
Thanks, I'm glad you like it!
You will of course see different returns without the specific lookback I'm using. Also, comparing to SPY is different from comparing to the world index, as the S&P 500 has massively outperformed during the period from 2009 to 2025. I like to keep the strategy global, as nobody knows if US stocks will continue to outperform or reverse to the mean :-) Finally, you will have worse drawdowns without the proprietary drawdown protection layer I'm adding.
But still, even with these limitations you should be able to get a positive alpha over long time horizons. What was your process for backtesting the sector basket and the factor basket and then combining them? And what was the time period for your backtest? Just asking out of curiosity 😊
Yes, it's likely your proprietary drawdown strategy makes a big difference. ETFREPLAY uses total return ETF data. For relative strength selection, I used 50% 6-month/50% 12-month lookback period to choose the top sector and top factor. Perhaps other timeframes work better. For the 10 year period, I did get slightly better Sharpe .73 vs .65 using VT as the benchmark.
For drawdown, with ETFREPLAY, it goes to cash if the top sector/factor is below its own 10-month moving average. Yours is probably more effective than that.
Thanks for the great work!
Thanks for creating this, a very useful list and does well to make sense of the endless world of tickers. Especially for indecies.
I might create one with all the amusing tickers out there. FAT and H20 comes to mind for the fast food brand owner and Water ETF respectively 😂
Thanks for your comment! The ETF market does indeed seem endless.
That list sounds like great fun 😄
Honest question. Doesn’t the expense ratios of all these etfs eat at least a third of your investment if not more?
Hi! The annual expense ratios of the vast majority of these ETFs are between 0.08% and 0.25%. There are a few exceptions around 0.40%, but that's it.
Remember, these fees don't accumulate with every ETF you buy and sell. It's the total drag across a full year. The total annual drag from expense ratios for this strategy is typically around 0.15% to 0.20%.
Let me know if this answers your question? :)