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Model Portfolios

Our long-term DAX, MDAX and TecDAX model portfolios regularly outperform the respective indices. The strong performance of these model portfolios has garnered significant media attention.

Private investors can continuously track the portfolio rebalancing activity on the HappyYuppie website. Available options:

• Short-term tool: model portfolio rebalanced hourly
• Medium-term tool: model portfolio rebalanced daily
• Long-term tool: model portfolio rebalanced monthly

Model portfolio rebalancing is fully automated, performed by model portfolio optimisation software that implements the latest portfolio theory insights.

What are these model portfolios for?

Model portfolios provide indications as to whether the shares forecast and selected by the system in combination can achieve better returns than the respective indices.

What is special about these model portfolios?

These model portfolios are run by a fully automated process, from forecasting to portfolio composition, and illustrate the capability of our systems. Covariance is factored in to take account of correlation when selecting securities.

For whom are these model portfolios of interest?

The model portfolios are mainly of interest to investors looking for proof of the quality of our systems. They also serve as a stock selection aid to private investors.

Procedures and methods

Like shares, model portfolio selection is conducted using the risk/return indicator. The portfolio selected is then the one evidencing the highest risk/return indicator value.

1. All possible combinations of 1 – 5 equities in an index are analysed. Cash holdings are also factored in, thus all cash is an option as well as cash and one equity, two equities etc.
2. For each of these combinations projected 1-day returns are analysed as well as risk, in the form of historical volatility exceeding the standard deviation.
3. The factors expected return and risk (volatility) are captured together in the risk/return indicator. A risk adjustment is applied to the expected return reflecting volatility. Higher risk reduces the risk/return indicator value, while higher return increases the value. Risk and returns are effectively in an inverse relationship.
4. The portfolio ultimately selected is then the one evidencing the highest overall risk/return indicator value. Portfolios are only rebalanced however when there is still benefit after factoring in 0.5% transaction costs on purchases and sales. This will be the case when the rebalanced portfolio offers the prospect of significantly greater returns. When two portfolios score evenly, the portfolio holding the most pre-existing positions is preferred, thus minimising transaction costs.

The equities in the portfolio are equally weighted. A maximum 20% of model portfolio value may be invested in any one equity. Portfolios only contain equities included in an index.