Holding several shares

What it is

A ranking rule scores a list at each rebalance and holds the top few, swapping as the order changes.

A portfolio rule holds set weights, or weights worked out from how much each asset moves, and puts them back on a schedule.

How to write it

Each example opens in the Strategy Agent with the words typed in. Nothing is sent until you press its button.

Its recorded tests

The evidence explorer runs rules like these across fixed sets of US, UK and European shares and funds, with the same costs throughout, and sets each beside simply holding. See the momentum ranking tests. See the rotation tests. See the low volatility tests. See the risk parity tests.

Templates in the community library:

• Top 3 of the Magnificent Seven by 12-month return: Each month, hold the three Magnificent Seven stocks with the strongest trailing 12-month return, equal weight.
• Top 3 of the Magnificent Seven by 6-month return: Each month, hold the three Magnificent Seven stocks with the strongest trailing 6-month return, equal weight.
• Top 5 of 15 US large caps by 12-month return: Each month, hold the five strongest of 15 large caps across sectors by trailing 12-month return.
• US stocks, international or bonds: hold the leader: Each month, put the whole portfolio in whichever of SPY, EFA and TLT had the best 12-month return.
• Stocks, bonds or T-bills: hold the leader: Each month, hold whichever of SPY, TLT and BIL (T-bills) had the best 12-month return, so cash can win.
• Stocks, bonds or T-bills: 6-month leader: Each month, hold whichever of SPY, TLT and BIL (T-bills) had the best 6-month return, so cash can win.
• US, developed or emerging markets: hold the leader: Each month, hold whichever of SPY, EFA and EEM had the best 12-month return.
• Sector rotation: top 3 of 6 sector ETFs: Each month, hold the three sector ETFs with the best blend of 12-month return and low volatility.
• Multi-asset rotation: top 2 of 6 ETFs: Each month, hold the two strongest of US stocks, developed, emerging, bonds, gold and REITs.
• The 3 calmest of 8 ETFs: Each month, hold the three ETFs with the lowest 1-year volatility, and scale down when the portfolio runs hot.
• The 4 calmest defensive stocks: Each month, hold the four least volatile of eight consumer, retail and healthcare staples.
• Risk-parity mode: stocks, bonds, gold, REITs: The agent's risk-parity mode on SPY, TLT, GLD and VNQ: hold the calmer assets, capped at 40% each, with a 10% volatility target.
• Hierarchical risk parity across 5 ETFs: HRP weights across the calmer of SPY, EFA, TLT, GLD and VNQ, capped at 40% each, with a 10% volatility target.

What to watch for

• Only shares and funds that trade today are in the data. A company that failed, was taken over or was delisted is not in it. So a test that picks from a list of shares is flattered, by an amount the test cannot measure.
• Every rebalance trades, and every trade pays costs, so a monthly rebalance pays more than a quarterly one.

The rules it uses

• Ranking rules: hold the leaders of a list
• Holding several things at set weights