The portfolio was constructed using publicly traded ETFs representing various asset classes:
The Pathfinder rules-based process works by sorting the ETFs based on trailing three-month returns. On a monthly basis, the four best-performing assets are bought and held for the following month.
The Pathfinder algorithm may make changes as often as the start of every month, based on the most recent three-months of performance data. The oftentimes high turnover of this strategy is best suited for being employed in a tax-sheltered account, like an IRA. We also employ a risk hedge with this strategy. Risk control is based on holding cash if the price of an investment security falls below a 6-month moving average.
Pathfinder Portfolios require a minimum of $55,000 and are usually included in accounts of over half a million dollars as about a ten percent allocation. When used in conjunction with an Alhambra Portfolio, the impact of a Pathfinder Portfolio will often be to increase allocations to stock, commodity, bond, or real estate positions already held by the Alhambra Portfolio. The goal is to increase the performance of an overall strategy that remains broadly diversified.