In this post, we will explain how simulate weighted portfolio easily with Lazarus-ETF.

First, select the simulate menu and move to the simulation screen.

Simulation menu
Strategy selection

The process of Lazarus-ETF’s portfolio extraction consists of three-phase.

-Selection phase
-Weight phase
-Allocation phase

The weighting strategy only adjusts the weight of the portfolio constituents at every rebalancing period, so there is no need for the selection and allocation steps.

Above diagram shows an example of portfolio according to the volatility reverse weighted strategy.

Now let’s select simulation period. You can move to any tabs with tab menus on the left of the screen.

Simulation period

You can choose any period starting from Jan-2000.

The longer the simulation period, the fewer the number of ETF items to choose from.

And if you change the period, you must select all items again.

Next, ETF item selection.

Item selection

Lazarus-ETF supports more than 900 ETFs. So you can simulate your portfolio with various exotic ETFs.

Here are ETFs we chose for the test. We also included VIX related item which is popular these days.

-EEM, iShares MSCI Emerging Markets Index Fund 
-USO, United States Oil Fund
-GDX, Vaneck Vectors Gold Miners ETF
-TLT, iShares 20 + Year Treasury Bond
-SVXY, Proshares Short VIX Short Term Futures ETF

Next, let’ select a target item.

Target item

We selected TLT, 20 year treasury bond ETF by selecting type ‘Bond’ on the selection menu.

If you selected, at this point, you can run the simulation right away. But we will explain the remaining options.

In the weighting strategy, the selection phase is not needed, so there is nothing can change.

Selection phase

Next, the weighting phase. For the weighting strategy, you can select three weighting methods as shown below.

Weight phase

For each rebalancing time, the equal weighting method adjusts the weight of each item to be equal.
The volatility weighting method utilize the volatility of each item so that the weight of the high-volatility stocks decreases.
You can also insert the weight of the item manually. The portfolio is rebalanced each time according to the input weight.
We will choose the equal weighting method.

Every selected values are saved immediately and temporarily. So you can simulate the strategy right after you changed the value.

Next, allocation phase. But the weighting strategy does not need allocation phase, so let’s just move on.

Allocation phase

Lastly, you can change investment parameters.

The Lazarus-ETF allows you to choose from a variety of investment parameters.

First, the investment period represents the rebalancing cycle. For example, if the simulation period is one year and the investment period is two months, the portfolio will be rebalanced for a total of six times, including the first rebalancing, and will be cashed at the end.

The quote gap is the difference between the close price of the item and the buy / sell price used in the simulation. The bigger the value, the more conservative the simulation can be.

The Lazarus-ETF allows you to choose your taxation method. US follows a transfer tax (a tax on trading gains and losses), while in Korea, follows a transaction tax (a tax is levied on each transaction). Of course, US ETFs are subject to US tax laws, but Lazarus-ETFs can choose tax methods to let users test various investment environments.

When you click the simulation button, you can see the result immediately.

Simulation result

As you can see, In Lazarus-ETf, you can check the returns of each ETF items.

If you logged in, you can save the strategy after the simulation.

After saving, you can click the Invest button to view the updated portfolio with recent data for investment. The data update date is displayed at the top of the screen.

You can also simulate the strategy again by pressing the Simulate button.

In this post, we learned how to utilize Lazarus-ETf’s functionality to simulate the weighting strategy.

We will visit again with more various strategies.



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