iQ Mutual Fund Style Box Rotation Model
IMPORTANT! In any given 3-month period, the iQ Mutual Fund Style Box Rotation Model can be heavily allocated to money market / equivalents.
INVESTMENT OBJECTIVE
The iQ Mutual Fund Style Box Rotation Model seeks to provide risk-adjusted returns in excess of the S&P 500 Index by selecting four style box mutual funds based on a time-tested dual factor technical strategy.
RULES-BASED PROCESS
The iQ Mutual Fund Style Box Rotation Model investment model utilizes an elegantly robust and unique strategy that combines style box rotation with quarterly technical indicators.
The Model begins with a starting universe of ten technical strategies (one for each domestic style box) and selects the four strategies furthest based on 6-month Relative Strength Index (RSI) and 11-month price momentum. Each market timing strategy is unique to its underlying style box and can take a long or cash position in any given seasonal quarter (Feb, May, Aug, & Nov).
The style boxes from which the Model selects its four strategies are:
Large Cap (Core, Growth, & Value)
Mid Cap (Core, Growth, & Value)
Small Cap (Core, Growth, & Value)
Micro Cap (Core)
Why rotate between style boxes?
Advisors hoping to capitalize on market cycles and shifting investor trends may find it advantageous to rotate between investment style boxes for the following reasons:
Diversification: Investing in a range of investment styles, such as value, growth, or income-oriented stocks, can offer diversification benefits by alternating between style boxes. By utilizing the growth potential of various investment styles, this can help lower portfolio risk and even increase returns.
Risk Management: Changing the allocation of your portfolio to various investment styles in response to shifts in the market can also help you manage risk by rotating between style boxes. Investors may gravitate toward defensive, income-oriented investments like value stocks, for instance, during uncertain economic times, and toward more aggressive, growth-oriented investments like growth stocks, during prosperous economic times.
Possibility of Higher Returns: By capitalizing on shifting investor tastes and market cycles, switching between style boxes may also present a chance for higher returns. Investors may be able to profit from market trends and possibly increase their returns by making investments in popular styles.
However, it's important to note that rotating between investment style boxes can also come with risks, such as missing out on potential gains if the market does not behave as expected.