The "Go Anywhere" ETF Portfolio

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The portfolio strategy for the TGT Go Anywhere ETF Portfolio allows complete flexibility in terms of asset allocation. You see, there are no no predetermined guidelines whatsoever as to the level of stocks, bonds, cash, regions, countries, sectors, or even asset classes in the portfolio! In short, this is a true �go anywhere� portfolio designed to follow the performance trail wherever it leads us.

The portfolio consists entirely of low-cost, tax efficient ETFs (exchange traded funds) with an overall objective to �own the best and ignore the rest.� More specifically, from a universe of over 600 ETFs, the TGT Go Anywhere ETFPortfolio will own only the top performers.

Own the Best and Ignore the Rest

One constant in investing is leadership is always on the move. Thus, it is vital to employ a system that can adapt to ever-changing environments. For example, everybody knows that whatever was hot last year is often this year's dog.

However, it is important to recognize that this is not your typical �buy what worked best last week� type of approach (which, in our opinion, is both fraught with risk and just plain dumb). The momentum formulas we utilize are longer-term oriented and are designed to create positions that can be held for an average of 3-6 months at a time.

We utilize a momentum-based strategy due to the long-term reliability of the approach. Over time (we�re talking about years, not weeks or months), a momentum-based system will automatically adjust to leadership trends. Unlike valuation, fundamental, or economic variables, price is unique in that it cannot diverge from itself (I.E. If price is headed lower, it cannot be considered a good thing... unless of course, you happen to be short!). Thus, a momentum approach locks onto major leadership trends allowing profits to run and losses to be cut relatively short.

How Does It Work?

At the beginning of each week, every ETF in our universe (which excludes inverse indices, and leveraged indices) is ranked in terms of relative strength and momentum. We then create a list of the top 20%. From our list of the top ETFs, we then review each for liquidity and technical health.

It is important to note that while the rankings of the ETF�s are done by computer, the final allocation decision rests with the manager who will take risk factors and current market conditions/themes into account when creating the portfolio. Thus, this is not a �black box� approach to investing.

This Business Is All About Performance

I have been running "other people's money" at my firms since late 1987. And frankly, I've seen an awful lot of investment strategies come and go. After 20 years of investing in bull markets, bear markets, and everything in-between, in early 2006, I came across the simplest, most effective way to manage multiple markets that I had ever encountered.

But before I decided to go "live" with the strategy, I hired the largest institutional research firm in the country to conduct an independent test of the system. The test found that by making minor changes to the portfolio each week and then re-balancing the portfolio on a monthly basis, the system had impressive potential.

Between 1/1/96 and 12/31/06, which was a period that contained one of the greatest Bull Markets of all time and the worst Bear Market in a generation, the strategy would have produced an annual compound rate of return of more than +24% per year. (And for the record, at that rate, based on the "rule of 72," a portfolio doubles in value every 3 years!) Not bad for a strategy that only requires about 15 minutes a week to use!

The test was enough to convince me to go live with the portfolio. While the world of ETF securities is relatively new, the flexibility afforded by these vehicles makes them extremely popular among investment professionals.  So, in the beginning of 2008, we began to offer the portfolio to TGT members. Below is a combination of the historical testing we did from 1996 thru 2006 as well as our live returns from the begining of 2007.

TGT Go Anywhere ETF Portfolio
System Test Results 1996 - 2005
Live Results Thereafter




Year

TGT
Go Anywhere

ETF Portfolio


S&P 500
Index


ETF
Universe

Lipper
Global
Index
1996 +22.00% +20.30% +17.52% +14.66%
1997 +29.80% +31.01% +3.66% +12.90%
1998 +29.20% +26.67% +14.50% +14.34%
1999 +117.30% +19.53% +29.17% +35.97%
2000 +26.00% -10.14% -13.14% -10.27%
2001 +2.70% -13.04% -12.49% -17.37%
2002 -15.50% -23.37% -21.21% -19.53%
2003 +51.90% +26.38% +37.85% +32.05%
2004 +13.80% +8.99% +16.05% +13.91%
2005 +16.70% +3.00% +9.40% +10.76%
2006 +13.92% +13.62% +16.76% +18.77%
2007 +19.61% +3.53% +9.01% +11.03%
2008 -17.01% -38.49% -36.34% -41.05%
2009 +19.86% +23.45% +31.66% +34.96%
2010 +1.81% +12.78% +15.49% +8.30%

Cumulative
Return
+1,253.21% +104.22% +288.97% +127.31%


The above return calculations are based on independent system testing through 5/31/06 and live model portfolio trading thereafter. It should be noted that although the System Test was performed by an independent company, test results do not represent actual trading, do not take into account payment of commissions nor reinvestment of dividends, have inherent limitations, and are for informational purposes only. Our live trading results shown above represent model portfolio values based on the implementation of the program trade alerts. Past performance is not a guarantee of future results.

Risk Management is Built In

As with all TGT portfolios, the TGT Go Anywhere Global Portfolio also incorporates risk management strategies. We will utilize our �big picture� approach to managing risk where the objective is to stay �in tune� with the primary trend of the markets (i.e. Bull vs. Bear).

However, it is important to note that this is a �selection� oriented portfolio where owning the top performing ETFs takes priority over �timing� during bull market environments. Thus, we will make little attempt to sidestep �typical corrections� in the market. This is due to the fact that during corrective phases in the market, the more defensive issues will tend to rise to the top of the ratings system. Therefore, the portfolio should �self adjust� during difficult environments.

But, when bear market cycles are present, we will make every effort to take defensive measures within the portfolio.

Speaking of Bear Markets, below is a table illustrating the live trading results of accounts from the beginning of 2007. As one can plainly see, managing risk has played an important role in the overall performance. Although the market experienced a brutal bear market from October 2007 through October 2008, the TGT Go Anywhere ETF Portfolio managed to outperform its benchmarks by between 30.2% and 33.6% in just 22 months. Due primarily to the fact that we utilize a disciplined sell strategy during Bear Market environments.


"Battling the Bear"

TGT Go Anywhere ETF Portfolio
"Live" Trading Results

(For Period 12/31/05 - 12/31/10)
TGT
Go Anywhere

Portfolio

S&P 500
Index

Global
Benchmark
2006 +13.92% +13.62% +18.77%
2007 +19.61% +3.53% +11.03%
2008 -17.01% -38.49% -41.05%
2009 +19.86% +23.45% +23.34%
2010 +1.81% +12.78% +8.30%

Cumulative
Live Results
+38.00% -0.74% +3.84%

So, if you are looking for a portfolio with no limits (and no excuses) as to where it can invest coupled with a disciplined risk management sytem, the TGT Go Anywhere ETF Portfolio may be just the ticket.

 


Performance: +1,253 % since 1996 (S&P +104%)