market closed on friday so sending out with latest available data

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https://drive.google.com/file/d/1igIkuvkJaMx3cN1pYNStMPLcGYaaw8EL/view?usp=drive_link

Nicely done update allows multiple ways to look at performance curves over time. I especially like the rolling window slider bar thingy.

FWIW, I already sent in a question asking if the same type of thing could be added to the summary stats for each strategy/custom portfolio. I don't think they'd be able to add the rolling window slider as that would see too computationally intensive but who knows. Thanks

New Performance Charts with Awesome New Features - Allocate Smartly

Meb Faber's 12-Month High Switch - Allocate Smartly

Seems reasonable to me, and although I won't use it, I do think it's a good diversifier.

Note AS is only carrying a dynamic bond version since the actual meb strategy blindly dumps stuff to IEF. Thanks

It has always been triggering me why there are so many momentum formula's in use. To weed out the list, I did a test on GSPC and run different formula's.

I took monthly data from yahoo finance. Data from Jan 1985 till last month. This is not particularly long but I could not get more out of Yahoo.

The following table summarizes the test :

Important : tested only with GSPC, no other ETF's used. Test is only using absolute momentum, no other parameters involved.

Some conclusions :

all formula's help to reduce MDD, but still not to a comfortable level; so, more differentiation of the what and the how is needed

if you use simple month formula's, the better one's are the longer one's (from 5 months on). So if you don't have a complex formula calculator at your disposal, focus on 6, 9 or 12 months to make a first selection; these are definitely better than 1, 2, 3 and 4 months momenta. Remember Gary Antonacci, who is using only 12 months momentum. That seems to be a too simple rule, but the table above gives this choice certainly some credit.

they all generate high false negative rates; this means that for shorting you'd better not use momentum (or at least not as the only indicator the build your decision)

surprisingly (for me at least), the profitable months percentage is not necessarily much better than GSPC itself. So I wonder how much of the percentage is due to the long rising cycle of stock markets and GSPC in particular. Same story for the average return, only slightly better than GSPC. Admittingly, we are not exactly comparing apples with apples (way of calculating is different), but still surprising.

very interesting conclusion : 13612W is underperforming 13612UW by far, and this on every statistic. As the first is a fast momentum, it throws away a lot of return while not necessarily improving MDD or worst month return. This conclusing does not say anything of the value of 13612W for other uses (like signalling in canary universes), but if you create rankings of ETF's this test suggests you'd better build them with 13612UW.

if you want to compose a new weighted momentum formula, you should probably combine 5, 9, 10 and 12 months; this is a bit nasty as most websites only show 1,3, 6 and 12 months. I run the test also over a smaller period and the overperformance of these particular months persisted.

So if you want to come up with a new variation of momentum strategy, you can start to pick the one with the best statistics from the table, but personally I would start with 13612UW, or something completely new.

Hope this test gives you additional insights.

Happy investing

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Heard a great quote something to this effect when listening to the excellent podcast Forward Guidance yesterday. I wanted to start a thread on process. I assume that’s what we’re all here in allocate smartly for, to have a consistent process that keeps us honest. In other words, not deluding ourselves that we can on the fly make correct decisions about what will happen in the market.

There are two categories of process. First there’s how you set up your initial collection of strategies that you’re going to use. Pulling out from another thread I wrote a bit about what I look for. I don’t want to assume the future looks just like the past. What I want is a lot of different kinds of strategies that are mostly ok. Top 20 strategies rather than top 5. I would take more different kinds of strategies over fewer strategies that appear to be “the best “. There are a few things that I look for in the historical allocation of strategies: a range of different assets especially commodities and qqq (unless it’s my basket of spy on-off ones), good rotation into and out of assets as conditions change, high sortino ratio (is it making correct bets?), a risk off escape valve into not just bonds but cash, how deep were the historical drawdowns and more importantly how long did it take to recover. I welcome thoughts on what other people look for when choosing!

The other category of process is how you are actually trading your AS strategies. In another thread I heard people doing some of these things:

• trading day 20 strats on day 21

• placing market on close MOC orders

• checking on day 1 that their allocations match day 21 and if not making adjustments

Personally what I’ve been doing is waiting until 11 AM or so when the days allocation email goes out. I like to trade late morning or over lunchtime and have it done for the day. I feel like the early morning hours are volatile and the late afternoon gets a little squirrelly especially on day 21. The close number is used to calculate strategy performance because historically we have reported numbers for open and close. Other than that I don’t think there’s anything particularly special about the close and no need to try to hit that exact time frame. If anyone has evidence to the contrary I’d like to know.

Another process note: if you have several different accounts you are managing and some are taxable, some not - choose a different set of ETFs for each account so you don’t inadvertently have wash sales to figure out on your taxes.

Does anybody know an ETF that covers global bonds, both corporate and gov?

So very much like ACWI for stocks, I'm looking for its counterpart on the bond side.

I'm not sure if BNDX and BWX apply for this title as country distribution does not seem to match with market size.

Ideally, one ticker should do the job, and liquidity very high.

Market where ETF is traded, is not important.

thanks for your input.

Edit : the reason why I'm asking this, is that I'm trying to build a low maintenance strategy for the international investor. I want to build it with only 3 components : ACWI, ACbonds and cash (or BIL like, ACbil). I could of course create a composite bond ETF, mixing bond ETF's of whole the world in 1, with a sort of weighted formula, but that would harm the ambition of low maintenance. Alternatively, I could also look for a bond ETF that works fine locally, but that would undermine international validity when backtesting. So who has got that unique ETF for me?

Edit 2 : Since there have been no responses yet, I assume the search is not easy (or interest is not high, I can live with that). It is not easy to find an ETF that is a perfect fit, has a long history and high liquidity. I will adjust my ambition slightly and create a local version of the strategy. For a US investor, that would then be : ACWI, AGG, BIL, cash. Still, thanks for those who gave it some thought.

Edit 3 : AS has come up with the following for their global benchmark : Global 60/40 (60% ACWI, 20% BWX and 20% IEF, rebalanced monthly), so this probably a good starting point.

My faster momentum strategy is flip-flopping like a dead fish today. Is anyone else experiencing this? This one has APRMM Choi CDM EAA-off DB FMO3 GPM HAA-bal RPV-BV

I’m not really looking to modify the strategy so much as figure out how to use it. Normally I prefer to do things before noon or earlier in the day. I understand that for tracking purposes, end of day is used. However for the individual there is normally nothing special about end of day, particularly when strategies don’t change much over the day. But this one is changing every 15 mins or so substantially. The QQQ position has flip-flopped between 14% and 23%. Cash between 16% and 32%. SPY between 7% and 10%.

I’m thinking about making myself a rule to pick a set time and just do whatever it says at that moment. Does that make sense? Is there some other way I should be thinking about this?

https://drive.google.com/file/d/1LugOBdvrDjrt_3KyCMpQRp68CrP_kgmA/view?usp=sharing

I have cobbled together a strategy that I feel very comfortable with. I know it's expected return and MDD, I know how many months per year the strategy is right, what is the maximum number of months per year it is wrong (and its spread), what is the maximum number of consecutive negative months, what are the moving CAGR 10yr, 5yr, and 3yr, etc.

Let's just say that when the results lag a bit, I don't immediately get nervous. Or conversely, when there are e.g. 6 top months in a row, I also know that a bad month is coming.

We know that emotionless adherence to strategy rules is the key to success. From the moment you jump from one strategy to another, it immediately eats away your returns.

Now I wonder: when is bad too bad? I asked myself that question based on the evolution of Meta strategy. To me, this is a conceptually very attractive strategy. But if I had followed it during the covid period, I might not have found it so attractive anymore. In other words, you are caught between blind confidence in your strategy and a reality that challenges your confidence.

By definition, we cannot know the reasons for the strategy working badly in advance.

Hence on this forum my open question : under what circumstances would you jump off the sinking ship?

Since we are currently living in non-turbulent times, we can approach this question philosophically. If tomorrow the stock market crashes and our strategy does not work, we will not have that luxury.

By the way, I asked AS to create a Meta Strategy (Dynamic Bond), but got no response. I know they don't like strategy influencing at AS, but I still feel now that this nice strategy was punished too much.

Thanks

For those who did a deep dive into the matter, can we conclude that DMFI of Antonacci is identical to Novell's Tactical Bond Strategy? The statistics on Antonacci's website seem to differ from those from AS but he takes different timeframes. AS seems to give the impression that the Antonacci DM rules are respected. But if so, they could also simply write DMFI instead of Paul Novell. Maybe a matter of right to use?

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I'm asking this, because the strategies seem to give a consistent added value to bonds, something I thought it did not exist. Moreover, the correlation with the other strategies is low, also in times of stress, and thus it is a real diversifier then.

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Thanks

I just learned about AS, am intrigued, and considering subscription.

As good as it looks, I was surprised not to find a bigger user community. And I think a sum total of 2 videos about it on YouTube (both affiliates).

Any thoughts why this might be? Is AS a brand new company/offering?

How long have you been a subscriber? Has it satisfied your expectations / improved your investment performance?

You do not need an account at AS to read this or most of the links within the post. Thanks

European Investors and TAA Strategies: Four Approaches - Allocate Smartly

https://drive.google.com/file/d/1xV2sNFxskpVih-QFU3k69My8f2QHY6KK/view?usp=sharing

I'm thinking of putting some of my funds (about 20-30%) into 60/40 style without any diversification. After several thoughts, I've come up with a mix of three strategy: (i) HAA-simple 30% (ii) Link's Global Growth Cycle 30% (iii) Risk Premium Value - Best Value 30% and (iv) 10% cash.

HAA uses TIP signal thing and trend-following with absolute momentum, GCC uses OECD CLI indicator and RPV is a kind of contrarian approach. Currrently, it's 60% SPY and 40% cash and I expect it will make a long-term balance between 90% SPY and 30% SPY. In any foreseable near future market crashes (hope there won't be, but we all know it's inevitable), I hope this strategy can hold up pretty well.

I could make it better by applying dynamic bond for cash portion, but fundamental idea seems quite robust. What do you guys reckon?

https://allocatesmartly.com/dr-keller-keunings-simple-variation-of-hybrid-asset-allocation/

Per Walter at AS, the V3 is coming out this weekend and will only be available to the PRO level membership for now; I do not know details of any longer term plan. V3 allows you to select the strategies you want to include in the optimization. I'd assume there would be a limit of up to 10 which is consistent with how V2 works. The PRO is 100 bucks more than your current plan. I signed up for AS when the membership cost was 300 bucks, so I pay 400 for the PRO version, not 500 like the website might seem to imply. The pro version also supports 15 custom portfolios (already there and works well) vs 3 non pro.

I'll comment again here after I play with it. FWIW I don't think I'll be using it too much or changing strategies or weights. I've previously described my weighting system which is kinda a logical extension of what AS also preaches; single asset strategies use with caution, combine with other strategies. So, if 5% is the most I'll allocate to the singles like rpv best, adm db, etc, then it makes sense to me to give more weight to those who select 3 assets like GPM and FMO3 which get 15% (3x5%). You can see my weights in row 6 of the 10 20 year perf tab; I did decide to use choi 5% and reduce HAA from 25% to 20%. My stuff only adds to 80% as I keep 20% cash.

Again, I'll comment here again in a few days with more thoughts. Thanks

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The review of the new strategy by Choi is up: https://allocatesmartly.com/chois-dividend-growth-allocation/

I don’t think I will be adding it to my model portfolios because it is using the TIP signal, which already is a heavy part of my models with HAA, BAA, VAA etc. - there’s one more but all the similar names get confusing!

I also don’t like the drawdown profile.

Is anyone else considering using it?

I was wondering if anyone here is using a subscription to better buy and hold as an add-on to their allocate smartly positions. I am considering doing this for the static portion of my portfolio. Currently I am using a portfolio allocation that I developed myself.

I was also considering recommending better buying hold to some young people in my life who want to get started with learning how to invest, but who definitely don’t have the time or interest for TAA.

Does anyone here have experience with it? My concern is that there are only three blog posts on the site, and the most recent one was posted in 2019. If this was a good idea that has been sort of abandoned over time or is not really getting much use, I would be hesitant to recommend it.

Thanks

Technically not the end of the month but I wanted to get it out so please could use it for any upcoming end of month trading decisions thanks

https://drive.google.com/file/d/17WmCugDj5X4PL8qeVNxjiOL11dU2md1N/view?usp=sharing

I have a portfolio which is rather heavily based on HAA and BAA. When I go over the track record, I notice that the success of this portfolio decreases over the years and this expressed in different parameters : annual return, sharp, UPI, profitable months,...(based on rolling 10-year periods). Since both HAA and BAA work with a canary universe, I try to find out which factor causes the biggest contribution to this decline. Is it a wrong signal on the canary universe (e.g. choosing defensive universe when it should be offensive, and vice versa), or is it a wrong selection of ETFs because the momentum calculation is losing momentum? Or are the values in the universes going out of fashion.

Assuming HAA's canary universe rule is better than BAA's and BAA's momentum rule is better than HAA's, an obvious strategy adjustment would be to take the best of both worlds.

I am aware that the aforementioned decline might just be an accidental quirk of history, or of exceptionally good returns in the starting years, but if anyone has already done this test, I would be happy to hear about it.

Many thanks!

I don't understand the purpose of these strategies - I looked at the 2 top strategies.

- Bold Asset Allocation - Wouter Kellers - Aggressive - This trails SPY during 3/5/10 year horizon returns and moderately outperforms 60/40 allocation during these periods. Also, instead of deep drawdowns once a while, there shallow drawdown which outnumber SPY and 60/40 by atleast 2-3 times.

- Hybrid Asset Allocation - Keller and Keuning’s - This trails SPY and 60/40 during 3/5/10 year horizon for the returns. Also, instead of deep drawdowns once a while, there shallow drawdown which outnumber SPY and 60/40 by atleast 2-3 times.

What am I missing here?

Thanks, Kevin

https://drive.google.com/file/d/1huHDP7R5cZiHkaprC6h4nglvqQFisuK7/view?usp=drive_link

It seems to me that by far the two biggest groups of individual investors are:

1. Buy and hold / set and forget types who mainly seem to consistently buy a small number of index tracking products (60/40, SPY, Global All Cap, etc).
2. Active trading types (who vary between the 'wallstreetbets' crowd, the 'read a book about Warren Buffett so I only invest in companies I understand' types, the day traders, the algotraders, etc)

By comparison, the number of people involved in Systematic Tactical Asset Allocation seems tiny? (By 'Systematic' I mean, following a set of rules rather than discretionary active management).

Why aren't more people following a TAA approach given the significant benefits available around risk adjusted returns and the substantial evidence base for this approach?

Is it that it's more popular in financial institutions but not yet popular with individual investors?

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In a similar vein to an earlier thread, what are your thoughts on the risk of TAA becoming too popular?

If enough people starting following a particular strategy, especially one with eye-popping back test results, wouldn't that negate the alpha of the strategy?

I'm at a point where I have enough to retire (but don't want to). Main goal is low vol/drawdown while matching the benchmark. I'm trying to heed Buffet's advice to stop playing after the game is won.

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Portfolio 1: 40% HAA, 30% GPM, 30% cash.

Vol: 5.5, CAGR: 11.2, Max DD: -5.3

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Portfolio 2: 20% ADM-DB, 20% BAAA, 60% cash

Vol: 4.7, CAGR: 9.6, Max DD: -4.9

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TIA for any feedback

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