ARM Tutorial

The Asset Rotation Model (ARM) helps you determine which asset class (stocks or bonds) is most likely to outperform
each month. It utilizes a dynamic approach to
asset
allocation, allowing you to earn higher returns while taking on less risk.

This tutorial will guide you through applying the ARM’s recommendations to your own personal
portfolio.

Getting Started

The Asset Rotation Model is updated monthly. Updated recommendations are accessible with a premium subscription and are available on the first
trading day
of each month. They represent proper positioning for the duration of that month.

Updated recommendations can be accessed through the Current Recommendations
page, available at the top of our home page once you log in. An email is sent out each month to alert you when updated recommendations have been posted.

To get the most out of the ARM, you will want to update your holdings immediately upon receiving
the latest recommendations.

Note: If you invest primarily through you employer sponsored 401(k) plan, or the
Federal
Government’s Thrift
Savings Plan
(TSP), please see those specific models. The recommendations provided by those models utilize similar logic
to the ARM, and are customized to provide more tailored guidance.

How to Use

The most straightforward way to leverage the ARM is to follow it exactly, as it rotates between
stocks (SPY) and bonds (AGG).

• If the ARM selects SPY – the SPDR S&P 500 ETF, sell any previously established positions and
  move those funds into SPY. Use ticker symbol “SPY” to find this fund through your online
  brokerage account.
• If the ARM selects AGG – the iShares Core U.S. Aggregate Bond ETF, sell any previously
  established positions and move those funds into AGG. Use ticker symbol “AGG” to find this
  fund through your online brokerage account.

The ARM frequently maintains its position in a particular asset class for months or years at a
time. If the ARM’s recommendation does not change from one month to the next, no updates to your
account are required.

You will need to monitor both the ARM and your positions monthly.

Additional Considerations

The historical backtested performance of the ARM is based on following the model exactly,
maintaining exposure to only one asset class at a time, and moving the entire portfolio
according to each month’s recommendations. While the results speak for themselves, we understand
that you may be hesitant to
fully embrace an investment strategy that you’re not familiar with.

If that’s the case, we suggest using only a portion of your overall portfolio to follow the ARM’s
recommendations. As you see the results over time and become more comfortable with the model’s
performance, then consider applying the strategy to a greater percentage of your total
portfolio.

Advanced Users

For more sophisticated investors it is not necessary to restrict your investments to only SPY
when the model selects SPY, or AGG when the model selects AGG. The key concept to understand is
that the model is using these two funds as proxies for stocks and bonds. When the ARM selects
SPY, it’s an indication that stocks in general are performing well and are where your portfolio
should be positioned. When the ARM selects AGG, it indicates that stocks are in a difficult
environment, possibly on the verge of a market crash, and that bonds are the best alternative at
the time.

This means that you may substitute other forms of exposure to stocks when the model selects SPY,
and other forms of exposure to bonds when the model selects AGG. Please note, however, that
using different investments will result in your performance differing to some extent from that
of the ARM.

Note: The ARM works in sync with the Sector Rotation Model
(SRM). When
the ARM recommends stocks, you can utilize the SRM to find and invest in the top performing sector(s) of the market.

Color Coding

On the Current
Recommendations
page you will find the latest ARM recommendation, and you will also find a table that ranks all the funds
included in the ARM from best to worst. We have included this information for those who may wish to deviate slightly
from the model’s recommendation, either for diversification purposes or other reasons. In the Complete Ranking
Table, you will notice a color coding schema designed to alert you to the status of each option. The color coding is
as follows:

All items in green are acceptable investments, but we recommend you stick with the highest ranked
options to achieve optimal performance.

As a final reminder, not following the ARM’s exact strategy and recommendations will result in
returns that differ from the model’s historical and future performance.

This wraps up the ARM Tutorial.

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The information provided here is for informational purposes only. Model
returns do not reflect
any management fees,
transaction costs or expenses. Investing involves a great deal of risk, including the loss of
all or a portion of your investment.
Nothing contained herein should be construed as a warranty of investment results. Past
performance is not an indication of
future results. All risks, losses and costs associated with investing, including total loss of
principal, are your responsibility.
Model Investing maintains positions in the funds discussed within this site according to model
recommendations.