Modifying Dual Momentum Investing Model

Investors interested in the “Dual Momentum” model should check out the following summaries of this method of portfolio management.  The third link explains how the DM model can be modified.

Weighted Ranking SS Update

If your portfolio is approximately $100,000, the following percentages and shares are laid out for investors going into this coming week.  We first start with the most recent rankings data to start the week.  This information applies to all Platinum members regardless the size of your portfolio.

ETF Rankings:  The following ranking is current as of 9/27/2013.  Note the change in the starting date as a 182 day differential ends up starting on a weekend.  That starting date will be adjusted tomorrow or Tuesday when we can move away from a weekend starting date.

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ETF Rankings: VNQI for RWX

In the following rankings, I substituted VNQI for RWX as it shows up as a better performer in the international REIT space over the past two plus years.  Otherwise, this is the list of ETFs readers can use to populate their portfolios.  A few things to note.  An international bond (BWX) and a corporate bond (LQD) ETF moved from below to above the performance of SHY.  This is the first I’ve seen this in some weeks.

ETF Rankings:  As you peruse this ETF ranking data table, look for those ETFs with positive momentum.  While we concentrate of ETFs that are ranked higher than SHY, keep an eye on the gold ETF, GLD.  It has had a nice three month run and is likely to continue to more up the ranking table.



Due to the instability of this site, I don’t plan to post over here all that frequently.  Platinum members need to register on the new site ( ) in order to keep up with the latest information.

Using the Ranking Spreadsheet as a Timing Tool

This Post is in response to a comment from a member concerning whether the Ranking Sheet (and Momentum Percentage) might be useful as a general market timing tool for different markets (e.g. US Equities, non US Equities).

As suggested by the member, I’ve setup the spreadsheet with only 4 ETFs, US Equities (VTI), Developed Markets ex-US (EFA), Emerging Markets ex US (VWO) and (the inevitable) SHY as a momentum filter.

The sorted rankings are shown below. The only new addition to this view is that I’ve included the “absolute” momentum (ROC1t – ROC2t) as a separate column (this is the number as described in my earlier post, “Momentum Percentage – Calculation and Interpretation”, annualized (multiplied by 252) so that it shows a number that makes some sort of sense).

Dick's Test

Here are some observations to be taken from this simple list:

1. Only 2 ETFs (VTI and EFA) rank higher than SHY. ROC1 is positive for both. Maybe no need to panic if  holding these assets.

2. The top ETF (VTI) is showing -100% relative momentum – it is maybe topping out. Early warning sign if long.

3. For ETA, “relative” momentum is positive, “absolute” momentum is negative – Best of a bad bunch?

4. All ETFs other than SHY have negative “absolute” momentum (ROC1t – ROC2t) – not a bullish sign – in fact, bearish – prepare to bail – maybe when ROC1 turns negative (VTI and EFA).

5. On a “relative” momentum basis, nothing is looking better than SHY. Do I want to get into any new positions?

6. VWO looks downright nasty – don’t want to hold this one!

This is how I would think my way through an asset list if my primary selection tool was momentum.

So, yes, with a bit (a lot?) of thought I think the spreadsheet can be used as a timing tool – depending on style preferences and whether an “investor” is prepared to “trade” a little more. Rules are needed to establish frequency of review/decision-making.

If members would like to see the “absolute” column shown in the SS let me know and I’ll include it.

Hope this helps.


Momentum Percentage – Calculation and Interpretation

As promised in a recent comment I have prepared an explanation of how the Momentum Percentage number in the Ranking Spreadsheet is calculated and how it should be be interpreted. This may seem a little complex at first read, but I’ve tried to illustrate and make understanding as simple as I can. There’s lots of ink that may require lots of think!

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Answers to a Few Momentum Questions

Here are a few questions posed by a Platinum member and I thought they merited a response to all readers.  I encourage questions such as the following as they are likely rattling around in the minds of other readers.  Questions serve to help me know what users are thinking.  In addition, by writing out explanations, it solidifies my own thinking.  When teaching I had a large sign in my room that went like this.

If you ink it you think it!

Here are the questions.

  1. How do you calculate Momentum?
  2. What is your basis for selecting the ETF’s to invest in?   Is it exclusively Momentum?
  3. Is there a fixed or variable number of ETF’s you invest in?
  4. How you determine the size of each ETF investment?
  5. How often you review and change your portfolio  (33 Days ?)?

This material is not available for publication elsewhere on the Internet.

Question number one can be answered by digging into the Excel formulas contained in the Rankings spreadsheet.  This SS was just released by HedgeHunter and is still undergoing testing.  If you would like to try it, here is the link.

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Maxwell Portfolio Update: 30 August 2013

As a reminder to new members, the Maxwell is one of three portfolios where all the transaction details are not available for viewing.

One bit of good news for this portfolio is that over the last three months, or since launching a risk reduction model, the Maxwell picked up 140 basis points with respect to the ITA Index and 10 basis points on the VTSMX benchmark.  While the gain on VTSMX was slight, I’ll take it.  Since July 1, the Maxwell gained 50 basis points on the VTSMX.  The direction is encouraging.

Maxwell Efficient Frontier:  The current Maxwell asset allocation plan is a little riskier than optimized or what showed up when last analyzed.  However, the projected return is also a little higher.  I’ve noticed that following the “Dynamic” plus SHY model tends to push the portfolio Return/Risk ratio toward the northeast along the Efficient Frontier curve.

EF [Read more…]

Latest ETF Rankings

Anyone updating their portfolio tomorrow can make use of the latest ETF rankings.  Concentrate on ETFs that are outperforming the SHY or even SHY and VTI.

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Feynman Portfolio Study: Part 6-6


In Part 6-6 I continue the Risk Management theme by applying the SHY momentum filter to the “Classic” 50% US Equity/50% US Bond Feynman Portfolio introduced in Part 4 of the Study.

The performance of this portfolio is compared with the performance of the same portfolio with a 195 day EMA (ITARR) Filter (Part 6-2, Section 6.1.6) and with the “Dynamic” Feynman Portfolio with SHY Momentum Filter (Part 6-5, Section 6.2.3 of the Study).

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Basic Portfolio Update: Changes in Momentum

Photo taken at Cyclopedia show at the Portland Art Museum.

Photo taken at Cyclopedia show at the Portland Art Museum.

As the market rotates from day to day, changes will show up in any portfolio if one is following the “Dynamic” plus SHY model.  If you are new to the blog and do not know what I am referring to, be sure to read The Feynman Study.  For example, yesterday there were only two viable ETFs that were outperforming the SHY, our cutoff ETF.  As mentioned in a comment, only VBK and VTV were ranked above SHY.  Using closing figures yesterday, what are the latest results?  See first screenshot below.

One of the principle reasons for not updating any portfolio more than once every 33 days is to avoid a lot of whipsaws.  Many of you may not want to update your portfolio more than once every quarter.  Even then, I would not always update exactly at the end of the quarter, but set up a tickler on your calendar to update – say every 85 or 95 days so the rotation happens at different times of the month.

If you are monitoring your portfolio using the TLH Spreadsheet you want to keep a few shares in each of the critical asset classes.  As a review, here are those critical asset classes and associated ETFs.

  • U.S. Equities – VTI
  • Bonds and Income – BND or AGG
  • Developed International Markets – VEU or VEA
  • Domestic Real Estate – VNQ
  • Emerging Markets – VWO
  • Commodities – DBC
  • International Real Estate – RWX
  • International Bonds – BWX or PCY
  • Precious Metals – GLD
  • Cash – SHY

Several ETFs do not precisely fit the definition of the asset class, but they are close enough for “government work.”  If you are client of a discount broker other than TDAmeritrade (the firm I use) then seek out your own reference ETFs.  The above are only provided as examples and all are commission free from TDAmeritrade with exception of GLD.  In each portfolio I want to hold a few shares in each of the above asset classes so I can continue to calculate the ITA Index.

ETF Rankings:  The up market yesterday was sufficient to push VBR, VOE, and VTI back above the performance of SHY.  If the market stays up today it will impact the ETFs to include in the Gauss – scheduled for an update tomorrow.  Note that SDS and GLD are no longer dragging along the bottom.  Remember that we use SDS as our “canary in the portfolio” ETF and will rarely, if ever, include it in a portfolio.


Buy-Hold-Sell Recommendations:  If this is a $100,000 portfolio with $5,000 in cash, we will hold 277 or 275 shares of VTI, 185 shares of VTV, 64 or 60 shares of VOE, 10 shares of VBR, and 25 shares of VBK.  I round down to the nearest 5 shares as I want available cash to invest in the ETFs need to cover every basic asset class listed above.  The number of shares comes from the optimizer recommendations.  We are waiting for results from a study that will focus on momentum.  We hope to present that data within the next few weeks so keep abreast of The Feynman Study as new articles appear.

The process is quite simple.  Select your basic set of ETFs, run the optimizer, check the rankings for ETFs performing above SHY, and then buy the number of shares based on the optimizer recommendations.  If just starting a portfolio, buy fewer shares than max out the size of the portfolio.  In a few months the number of shares to purchase every 33 days or the review period you choose, will smooth out.  If you are still uncertain what to do, follow the process when I update the Gauss portfolio tomorrow.