Backtesting Monthly Rebalanced Static ETF Portfolios

Summary

This article describes how to simulate statically allocated, periodically rebalanced portfolios with QSTrader. It uses an All Weather style allocation across US equities, long and intermediate government bonds, gold, and commodities as an example, and compares it with a 60/40 stock and bond benchmark. The portfolio is rebalanced monthly, with orders placed at the next weekday open; the script also maintains a cash buffer to accommodate overnight price moves.

The method is to supply historical ETF data and positive allocation weights to a command line backtest tool, which rescales weights if they do not sum to the full portfolio. The example illustrates the portfolio construction and simulation setup, not evidence that the allocation will outperform or remain diversified in future markets. Results depend on the historical data, the chosen rebalance schedule, and the execution assumptions; the article notes that its described software version does not support short positions. It also indicates that the script can be modified to test other rebalance frequencies or benchmarks.

Key ideas

• Static buy and hold portfolios can sell and buy assets periodically to restore target weights.
• The example portfolio spreads exposure across equities, bonds, gold, and commodities.
• The described backtest rebalances at month end and executes at the next weekday open.
• Allocation weights need to be positive, and the tool rescales them when they do not total the full portfolio.
• Backtest performance depends on historical ETF data and execution assumptions, and does not establish future returns.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.