If you’re new to this post, please check the first post to know what this is about.
Since Sector SPDR ETFs page was updated with January data, let’s update our numbers and buy more participations to our ETFs.
Since last update, here is how the portfolio looks like today:
Symbol
Quantity
Cost Price
Cost Basis
Close Price
Value
Unrealized P/L
XLB
0.1706
89.67
15.30
89.26
15.23
(0.07)
XLC
1.3821
99.38
137.35
103.37
142.87
5.52
XLE
0.3273
93.48
30.59
91.24
29.86
(0.73)
XLF
2.1001
50.98
107.06
51.54
108.24
1.18
XLI
0.429
142.67
61.21
138.61
59.46
(1.75)
XLK
0.6323
241.20
152.51
236.33
149.43
(3.08)
XLP
1.5725
77.72
122.21
80.61
126.76
4.55
XLRE
1.1019
41.66
45.90
42.26
46.57
0.67
XLU
0.9634
79.42
76.51
79.39
76.48
(0.03)
XLV
0.6372
144.08
91.81
146.03
93.05
1.24
XLY
0.7251
231.21
167.65
223.78
162.26
(5.39)
TOTAL
1,008.10
1,010.21
2.11
I’ve made some changes to how I calculate the weight from a grand total. I still don’t like how it works, especially when there are negative and positive numbers. Until I will have an idea about this, I will just do nothing with the ETFs that are in negative in the previous month.
So here is January 2025 data for SPDR ETFs and the $1,000 investment into the 11 sectors that I will do now:
Symbol
Sector
Last Month
Rank
Ratio of grand total
Monthly investment
XLK
Technology
-0.70%
1
-1.74%
(17.39)
XLP
Consumer Staples
0.55%
2
1.37%
13.66
XLRE
Real Estate
1.83%
3
4.55%
45.45
XLE
Energy
2.39%
4
5.94%
59.36
XLU
Utilities
2.92%
5
7.25%
72.53
XLY
Consumer Discretionary
3.54%
6
8.79%
87.93
XLI
Industrials
5.02%
7
12.47%
124.69
XLB
Materials
5.58%
8
13.86%
138.60
XLC
Communication Services
5.82%
9
14.46%
144.56
XLF
Financials
6.54%
10
16.24%
162.44
XLV
Health Care
6.77%
11
16.82%
168.16
Remember, Technology will have no investment this month. Need to come up with a better idea on how to calculate the weight of each sector, even when some of them are in negative. If you have any ideas, please drop a comment.
I’ve been toying with an idea for a while now, and I finally decided to put it to the test. My curiosity revolves around the “trade the trend” strategy, specifically by following Sector SPDR ETFs.
For those unfamiliar, the “trade the trend” strategy is a trading approach that involves identifying and capitalizing on prevailing market trends. As described by HowToTrade.com, this strategy relies on spotting the direction in which a market is moving and making trades that align with that trend. The goal is to ride the trend for as long as possible to maximize profit.
However, I wanted to add a twist to this strategy. Imagine we’re in a bull market, a period during which prices of securities or assets are rising or expected to rise. In simpler terms, everyone is saying the stocks are going up. My idea is to rank the ETFs by their performance in the previous month and invest a weighted amount in each sector.
The weight ratio by grand total is a formula used to express the proportion of a part relative to the grand total. It is calculated by dividing the weight of the part by the grand total weight, then multiplying by 100 to get a percentage. This shows how significant each part is within the whole.
Let’s see an example of weighting with a grand total investment of 1,000:
Company A – 100
Company B – 150
Company C – 50
Company D – 250
Company E – 450
Grand Total Investment = 100 + 150 + 50 + 250 + 450 = 1,000.
Now, to compute the weight ratios for each company:
Company A: Weight Ratio = (100/1,000) × 100 = 10%
Company B: Weight Ratio = (150/1,000) × 100 = 15%
Company C: Weight Ratio = (50/1,000) × 100 = 5%
Company D: Weight Ratio = (250/1,000) × 100 = 25%
Company E: Weight Ratio = (450/1,000) × 100 = 45%
What this means is that from the monthly available amount, 10% of it will be invested in Company A, 15% in Company B, 5% in Company C, 25% in Company D, and 45% in Company E.
Every month, the rank will be recalculated, and specific amounts from the monthly available amount will again be invested according to the calculated weight based on the performance of each ETF in the previous month.
Now, let’s see a real world example with the Sector SPDR ETFs.
According to SPDR page, December 31, 2024, monthly performance for each sector is detailed below:
After working some magic with Power Query, I generated the ranking below. Keep in mind: lower ranks indicate poorer performance.
Symbol
Sector
1 Month
Rank
Ratio of grand total
XLB
Materials
-10.79%
1
1.52%
XLE
Energy
-9.54%
2
3.03%
XLRE
Real Estate
-8.60%
3
4.55%
XLI
Industrials
-7.96%
4
6.06%
XLU
Utilities
-7.93%
5
7.58%
XLV
Health Care
-6.20%
6
9.09%
XLF
Financials
-5.44%
7
10.61%
XLP
Consumer Staples
-4.81%
8
12.12%
XLC
Communication Services
-1.38%
9
13.64%
XLK
Technology
-0.34%
10
15.15%
XLY
Consumer Discretionary
1.13%
11
16.67%
Given the table, we need to allocate 16.67% of our available funds into the XLY ETF (Consumer Discretionary) and 1.52% into the XLB ETF (Basic Materials), and similarly for each sector.
If we have 1,000 to invest this month, the distribution would match the percentages listed in the final column:
Symbol
Sector
Ratio of grand total
Monthly investment
XLB
Materials
1.52%
15.15
XLE
Energy
3.03%
30.30
XLRE
Real Estate
4.55%
45.45
XLI
Industrials
6.06%
60.61
XLU
Utilities
7.58%
75.76
XLV
Health Care
9.09%
90.91
XLF
Financials
10.61%
106.06
XLP
Consumer Staples
12.12%
121.21
XLC
Communication Services
13.64%
136.36
XLK
Technology
15.15%
151.52
XLY
Consumer Discretionary
16.67%
166.67
For this test, my focus is on the long-term performance of this investment strategy. I’ll be disregarding recent events like the fake Santa rally, new presidency, and the past two years of high returns, starting with data from December 2024 only.
My plan is to conduct this exercise every month, investing 1,000 each time using my Demo account in Interactive Brokers broker. I’ll be sharing monthly blog updates on the progress. As for the duration of this test – I’m not sure yet, I will let the Universe decide this 🙂
So here’s the January test investment of $1,000 into the 11 sectors:
