We've had a lot of questions about the World Cup portfolio (WCP) and its amazing performance so far this year. Through the first 3 quarters of 2014, it's had a very positive 99% return on invested capital.
One of the many questions we have had is, "Can I substitute ETFs for the markets in the WCP?" The short answer is yes you can, but there is one important caveat.
You're not going to get the same returns as the World Cup portfolio. The main reason for this is the leverage involved in the futures markets. In the futures market, you're only putting up a small percentage of the value of the contract. For example in gold, the current margin is $4,400 to control 100 ounces, which is the size of one gold futures contract. Your margin requirements are less than 4% of the total value of one contract. If gold is trading at $1,250, 100 ounces or one contract is worth $125,000.
You don't have that same kind of leverage in an ETF.
Here are the equivalent ETFs to replicate the World Cup portfolio. Please remember this is not a recommended portfolio, as there is no way to short corn, wheat, or soybeans.
Gold ETF equivalent: GLD (PACF:GLD) You can go long and short this ETF.
U.S. Dollar ETF equivalent: UUP (PACF:UUP) for long and UDN (PACF:UDN) to short.
Crude Oil ETF equivalent: USO (PACF:USO) for long and DNO (PACF:DNO) to short.
Corn ETF equivalent: CORN (PACF:CORN) No equivalent to go short.
Wheat ETF equivalent: WEAT (PACF:WEAT) No equivalent to go short.
Soybeans ETF equivalent: SOYB (PACF:SOYB) No equivalent to go short.
Remember, you don't have the leverage with ETFs as you do with futures and you don't have the potential to short short corn, wheat, or soybeans, which represents 50% of the World Cup portfolio.
Opening a futures account is no more difficult than opening any securities account. In many instances, the brokerage company will handle both equities and futures, although not all brokers can do this.
The World Cup portfolio has been tracked for 29 quarters. It has had 24 winning quarters and only 5 losing quarters. There have never been back-to-back quarterly losses in this portfolio. The very best quarter we have seen in WCP is a gain of $72,342 and the biggest losing quarter was a loss of $7,677.50.
Once again, I do not recommend using ETFs to try to replicate this portfolio as it was designed for futures and before many of these ETFs saw the light of day.
If you have any questions about the World Cup portfolio, please don't hesitate to comment below this post.
Every success with MarketClub,
Adam Hewison
President, INO.com
Co-Creator, MarketClub
Adam, you have said in the past that one can use less money if you trade mime lots.
Please explain this fully as I do no want to risk 50K at this time.
Should new World Cup investors start by buying 1 contract for each position or should we wait for a reverse signal for each position?