Capital Exposure For The ETF Portfolio

The ETF Portfolio is constructed using up to five active positions. Each position is allocated 20% of the portfolio captial. However, oftentimes there is no capital allocated to a particular 20% slot. This money is assumed to earn nothing, but by the same token, is not exposed to market risk. Last year, the BLOG portfolio earned 26.6%, but I thought it would be instructive to figure out how much market exposure the portfolio had. As a benchmark, consider that each position has a potential to be in the market 365 days. Therefore, the five 20% positions have a potential number of days of exposure of 5 x 365 = 1,825. In fact, the BLOG was exposed to the market an actual 1,112 days. The ratio of exposure is 1,112/1,825 = 61%. This says that "on average" our total capital was only exposed to the market 61% of the time. Yet, we still returned 26.6%. The key here is that on average the algorithms put us in the market at the right times, and out of the market at the right times.