Alpha – the subscription, provides quantitative guidance to individual investors with algorithm-based ETF selection and buy/sell decisions.
Alpha – the algorithm, utilizes computers to collect and analyze data from the financial markets looking for passive index ETFs that are appreciating faster than the SPY and recommends owning them.
Alpha is designed for individual investors –
- looking for long term capital appreciation
- willing to allocate $10,000 or more capital to algorithm investing
- have a brokerage account approved for trading ETFs
- an Alpha subscription that provides weekly updates
Three Steps to Success
Step-1 obtain brokerage account
Step-2 Subscribe to Alpha
Step-3 Begin investing with Alpha
The following example assumes an investor has decided to allocate $10,000 to the Alpha quantitative investment strategy. Alpha selects up to four (4) ETFs, depending on market conditions, that meet strict criteria:
- Historical – Have existed through both up and down markets
- Scale – Have more than $1 billion Assets Under Management (AUM)
- Liquidity – Trade more than 300,000 shares per day
- Focused – Be concentrated in a sector or geographic region
- Passive – Tracks a declared index that does not change objectives over time
- Diversification – Avoid similar or overlapping sectors (i.e. Alpha will not select similar or overlapping sector ETFs offered by competing issuers)
Investors would allocate their capital equally among four (4) baskets. Over a decade of statistical analysis has shown that equal allocation among four ETFs results in the maximum investment return with minimum volatility.
Figure-1: How an investor would allocate their investment capital among the four (4) recommended ETFs. In this example, the investor would allocate their $10,000 capital in four equal allotments of $2500 to each ETF recommended by Alpha.
Making an Investment using Alpha
Investors will allocate equal amounts of their investing capital into four (4) equal allotments. In the example presented, an investor will allocate their $10,000 to the four (4) ETFs recommended by Alpha.
Option-1
Investors can purchase whole number (integer) shares of each fund closest to the allotment divided by the price per share. Option-1, in this example, would result in a cash residual of $194.83, 1.9% cash along with their four ETFs.
Figure-2: This option demonstrates how an investor would allocate their $10,000 working capital among the four (4) ETFs recommended by Alpha. With option-1, investors are left with a cash residual in their accounts. Some cash may be needed to cover the commissions some brokerages charge clients to purchase shares.
Option-2
Investors may desire to purchase allotments that are evenly divisible by 5. In this example, the investor will be able to utilize slightly more capital resulting in a smaller cash residual.
Figure-3: This option demonstrates how an investor would allocate their $10,000 working capital among the four (4) ETFs recommended by Alpha but using allotments evenly divisible by 5. With option-2, investors are left with a smaller cash residual in their accounts. Recall, some cash may be needed to cover the commissions some brokerages charge clients to purchase shares.
Your Weekly Subscription
Each weekend Alpha subscribers will be presented with the weekly update graphic showing the current portfolio’s holdings (ETF ticker symbols or cash), the recommended action for the following week (Buy – Hold – Sell), and the allocation to each ETF, Figure-4.
Figure-4: Each week, investors are encouraged to log into their Alpha subscription. The graphic shows the current portfolio’s holdings (ETF ticker symbols or cash), the recommended action for the following week (Buy – Hold – Sell), and the allocation to each one.
Once an ETF gets sold, it becomes a cash ($) position until the ETF is either bought again or gets replaced with different ETF.
Periodic Rebalancing
Periodically some or even all four positions will be replaced with different ETFs. The process is called a re-balance. During a re-balance, investors will re-allocate 25% of their entire holdings to each of the four (4) new ETFs.
Points to Consider
Alpha is a mathematical model. It purchases or sells ETFs at the close on Fridays. It is 100% invested (i.e. it can purchase and sell fractional shares). Alpha does not pay commissions. Investors may end up buying and selling for slightly more or less the following week, can only purchase whole number of shares, and may be required to pay brokerage commissions, resulting in slightly different investment returns than Alpha.
Brokerages can and do charge clients commissions for buying and selling securities. Investors may need to allow for a small cash residual to cover the commission expense when purchasing ETFs. Commissions will automatically be deducted from the proceeds of sales.
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