Choose an investment portfolio size for your ETF strategy in Xplore
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April 2024 · 5 min read

Choosing a portfolio size in Xplore ETF


Choosing a portfolio size is an important part of building a strategy. Within the Xplore ETF tool, users can create a portfolio with between 1-5 ETFs. ETFs are themselves diversified and so it is not necessary to choose a large number of assets to create a performant and diversified portfolio with this tool.

Let's investigate this idea with an example. We'll build a concentrated ETF strategy using the Xplore ETF tool:

  • Including all ETFs in every asset class.
  • Filter to just the best 10% of ETFs by RSI.
  • Sort by a combined 3, 6, and 12-month momentum.
example 1 stock portfolio size strategy

The result of this strategy is outstanding, returning almost 16% per year since 2010 with a Sharpe ratio of 0.85.

output of concentrated strategy

Let's test the same strategy with a larger portfolio size of 5, leaving all else equal.

portfolio size of 5

As expected, setting the portfolio size to 5 reduced the volatility, however, the risk-return performance of both is quite similar.

Our Xplore tool is designed to be very dynamic and robust enough to investigate all sorts of investment strategy design decisions. Please let us know any feedback and enjoy building your own strategies!


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