Author Topic: Dual Momentum Investing  (Read 182370 times)

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 24895
  • Age: -999
  • Location: Traveling the World
Re: Dual Momentum Investing
« Reply #600 on: July 17, 2015, 07:51:29 PM »
I don't think that analogy holds, unless this is a limited capacity situation.

It's more like me saying "I don't bike to work, but you should."
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with a kid.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (occasionally) blog at AdventuringAlong.com.
You can also read my forum "Journal."

innerscorecard

  • Pencil Stache
  • ****
  • Posts: 590
    • Inner Scorecard - Where financial independence, value investing and life meet
Re: Dual Momentum Investing
« Reply #601 on: July 17, 2015, 07:57:51 PM »
So has the mustachian horde officially endorsed market timing as the new standard advice for all newcomers?  I'm seeing an awful lot of love in here for what looks to me like really bad advice, but I don't drive this train.

If you are all actually serious about this "market timing is totally fine" advice you're rolling around in, can I at least suggest you dispense that advice with a required disclaimer?  Something like "we generally recognize that market timing is always a losing game in the long run, but we recommend it anyway because..." then fill in the blank with whatever your current justification is for reducing diversification and making big contrarian bets on the market.  That way people have at least been warned that you're trying to fuck up their shit.

I think the vast majority of the people here don't recommend any market timing; DM is no different.  There's a small vocal minority who do market time.  Before smedley led the charge, now Miles does.  Doesn't change what most of us do.

Well said, Forummm.

Which is to say it's well suited to humans.

Uh, then why do you have a different default recommendation for all investors again?  I read forummm's post as an explanation for why it makes sense for Buffett to recommend that others do as he says rather than as he does, while it doesn't make sense for a DM advocate to do the same.

Ditto.

Why does it make sense for a DM advocate to not say everyone should do it, if it's easy and beneficial, and available to everyone?

What were smedley's ideas? Did events turn out discrediting him or her?
Inner Scorecard - Where financial independence, value investing and life meet: http://www.innerscorecard.co/

MDM

  • Walrus Stache
  • *******
  • Posts: 6434
Re: Dual Momentum Investing
« Reply #602 on: July 17, 2015, 07:58:13 PM »
As long as a "do as I say not as I do" statement is preceded/accompanied/followed by a "this is why" explanation, then one can look at the reasons and decide.

innerscorecard

  • Pencil Stache
  • ****
  • Posts: 590
    • Inner Scorecard - Where financial independence, value investing and life meet
Re: Dual Momentum Investing
« Reply #603 on: July 17, 2015, 08:00:41 PM »
I don't think that analogy holds, unless this is a limited capacity situation.

It's more like me saying "I don't bike to work, but you should."

It's actual the inverse of that, though, no? Miles is taking the weirder and less proven approach, but recommending the more conventional one to others as the default. So he's biking to work, but saying others should drive. Of course - that is a little interesting, isn't it?

Now that I think about it, what might make you uneasy is this - by taking this stance, if dual momentum ends up doing badly, then Miles won't have led lemmings down the abyss, even if he himself is hurt. And to me, that's a fairly ethical thing to do. It also serves Miles' self-interest (he won't be blamed and ridiculed).
Inner Scorecard - Where financial independence, value investing and life meet: http://www.innerscorecard.co/

forummm

  • Walrus Stache
  • *******
  • Posts: 7386
  • Senior Mustachian
Re: Dual Momentum Investing
« Reply #604 on: July 17, 2015, 08:09:41 PM »
I can't quite put my finger on why, but it bothers me when people say someone should invest in a different way than they do themselves.

Do as I say, not as I do?  The whole eat your own cooking thing I guess.  Seems hypocritical.

Maybe part of it is that it feels condescending--"this is good for me, but not for you--you wouldn't understand it, or wouldn't have the risk tolerance for it" or whatever.

Just me?  Anyone else bothered by that type of thing?

I actually think it's far more ethical. The reverse is often extremely detrimental, when the strategy that the teacher is following has a limited carrying capacity. For example, history or English professors telling their students to get history or English PhDs is unethical, because there are far less positions for professors than students.

Maybe you could pick a better example. Professors already have their job and would never be in competition with someone who wasn't even a doctoral student yet. Instead they might be legitimately encouraging students not to get a history PhD because the cost is high and the yield is low or nonexistent.

Perhaps realtors or some other field where the advisor would have to compete with he advisee and the barrier to entry is low, the profits are absurdly high, and the service provided is easily substituted among providers.

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Dual Momentum Investing
« Reply #605 on: July 17, 2015, 09:02:18 PM »
I can't quite put my finger on why, but it bothers me when people say someone should invest in a different way than they do themselves.

Do as I say, not as I do?  The whole eat your own cooking thing I guess.  Seems hypocritical.

Maybe part of it is that it feels condescending--"this is good for me, but not for you--you wouldn't understand it, or wouldn't have the risk tolerance for it" or whatever.

Just me?  Anyone else bothered by that type of thing?

I actually think it's far more ethical. The reverse is often extremely detrimental, when the strategy that the teacher is following has a limited carrying capacity. For example, history or English professors telling their students to get history or English PhDs is unethical, because there are far less positions for professors than students.

Maybe you could pick a better example. Professors already have their job and would never be in competition with someone who wasn't even a doctoral student yet. Instead they might be legitimately encouraging students not to get a history PhD because the cost is high and the yield is low or nonexistent.

Perhaps realtors or some other field where the advisor would have to compete with he advisee and the barrier to entry is low, the profits are absurdly high, and the service provided is easily substituted among providers.

You are missing the point.

The professor is the unlikely one who has already achieved tenure.

The students have a statistically low likelihood of getting future tenure (unlike the professor.)  For him to advise his students to seek tenure, is to condemn most of them to failure.

The point is that he is giving them bad advice based on the unlikely outcome of his own pursuit of tenure.

I'm not sure unethical is the best way to describe this phenomenon (perhaps delusional?), but it is certainly destructive for the students.
« Last Edit: July 17, 2015, 09:05:08 PM by milesdividendmd »
I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 24895
  • Age: -999
  • Location: Traveling the World
Re: Dual Momentum Investing
« Reply #606 on: July 17, 2015, 09:14:52 PM »
So it would be unethical to tell people to DM, because it's unlikely to succeed?

Unless the answer is yes, it seems that's a bad analogy.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with a kid.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (occasionally) blog at AdventuringAlong.com.
You can also read my forum "Journal."

innerscorecard

  • Pencil Stache
  • ****
  • Posts: 590
    • Inner Scorecard - Where financial independence, value investing and life meet
Re: Dual Momentum Investing
« Reply #607 on: July 17, 2015, 09:33:18 PM »
Strategies have different likelihoods of success depending on who you are temperamentally, so it does make some sense. Of course the big difference (really big) is that Miles does not know yet if he has succeeded or will, either.
Inner Scorecard - Where financial independence, value investing and life meet: http://www.innerscorecard.co/

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Dual Momentum Investing
« Reply #608 on: July 17, 2015, 09:56:13 PM »
So it would be unethical to tell people to DM, because it's unlikely to succeed?

Unless the answer is yes, it seems that's a bad analogy.

Not following your train of thought here.

The perfect corollary to the professor analogy (which was brought up in contrast to what I actually did) would be for me as a lottery winner to advocate for others to buy lottery tickets even though  I knew their likelihood of success was low.
« Last Edit: July 17, 2015, 09:57:59 PM by milesdividendmd »
I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Re: Dual Momentum Investing
« Reply #609 on: July 17, 2015, 10:09:25 PM »

I don't think that analogy holds, unless this is a limited capacity situation.

It's more like me saying "I don't bike to work, but you should."

It's actual the inverse of that, though, no? Miles is taking the weirder and less proven approach, but recommending the more conventional one to others as the default. So he's biking to work, but saying others should drive. Of course - that is a little interesting, isn't it?

Now that I think about it, what might make you uneasy is this - by taking this stance, if dual momentum ends up doing badly, then Miles won't have led lemmings down the abyss, even if he himself is hurt. And to me, that's a fairly ethical thing to do. It also serves Miles' self-interest (he won't be blamed and ridiculed).

This captures my thinking perfectly.

After plenty of consideration I believe in DM as a smart strategy that fits me well and I like my odds with it. (As evidenced by my skin in the game.)

But this was a leap of faith for me personally that I made after plenty of consideration, and study, and backtesting, and I have no desire (and am in fact afraid) to expose others to risking their money on my decision.

I am willing to pay for my own mistakes but want no responsibility for other people's.

If others come to the same (or different) conclusions from me I'm fine with it, but I don't really believe in advising others, because that presumes that I have the answers.

Lord knows I don't. I only have my own guesses.
I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Dual Momentum Investing
« Reply #610 on: July 17, 2015, 11:34:34 PM »
So has the mustachian horde officially endorsed market timing as the new standard advice for all newcomers?  I'm seeing an awful lot of love in here for what looks to me like really bad advice, but I don't drive this train.

If you are all actually serious about this "market timing is totally fine" advice you're rolling around in, can I at least suggest you dispense that advice with a required disclaimer?  Something like "we generally recognize that market timing is always a losing game in the long run, but we recommend it anyway because..." then fill in the blank with whatever your current justification is for reducing diversification and making big contrarian bets on the market.  That way people have at least been warned that you're trying to fuck up their shit.

What is this mustachian horde of which you speak?

I always thought the "Join the Cult" phrase on MMM, was meant ironically. From your comments It seems you have taken it quite literally.

Why do you care if there is "an awful lot of love" for active investing?

Isn't this is a forum for the exchange of ideas of and pertaining to mustachianism?

If you find a logical crack in someone else's argument, why not just attack the faulty logic  and argue on the merits?

You are clearly a smart dude, but you are not responsible for others opinions, or arguments. Only your own.

From my perspective you have

1. Equated my defending of my own decision to pursue dual momentum with trying to profit off of other people's investment decisions.

2. Claimed that I am trying to "fuck up other people's shit."

3. Claimed that defending the rationale of my own investment decisions is somehow disloyal to other readers.

You have felt comfortable making these statements about me, which I believe to be meritless. So I will make my own statement about you.

Cut out the sanctimonious crap.

Smart people can disagree.

The only way to convince people of your own advice (which for some reason you see as your responsibility to dispense) is to make smart arguments, which you are perfectly capable of.

Leave the moralistic platitudes to the preachers and politicians.  At least they get paid for it.
I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 24895
  • Age: -999
  • Location: Traveling the World
Re: Dual Momentum Investing
« Reply #611 on: July 17, 2015, 11:40:34 PM »
That's a fair point miles.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with a kid.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (occasionally) blog at AdventuringAlong.com.
You can also read my forum "Journal."

sol

  • Walrus Stache
  • *******
  • Posts: 5089
  • Age: 40
  • Location: Pacific Northwest
Re: Dual Momentum Investing
« Reply #612 on: July 18, 2015, 12:16:48 AM »
I think sanctimonious and moralistic mean pretty much the same thing, with the subtle distinction that the first is less genuine, but I feel neither of those things.  There is no moral high ground in a discussion about investment strategies, so maybe take a deep breath and curtail the attacks on me as a person?  I'm pretty sure some of our moderators have been strictly enforcing that forum rule about attacking arguments rather than people.  You wouldn't want to get snared.

I've been careful to stay on the right side of that line.  I've pointed out that your strategy is just pure market timing, and market timers always lose in the long run.  I've reminded you of your own argument that the strategy has a positive feedback mechanism, whereby it is more effective if you win over converts to follow the same strategy.  When I said you're fucking up their shit, I meant they will lose money if they follow the strategy.  See the difference?  Criticisms of the idea, not the person.  No moralizing.

Take notes if you have to.  Your use of personal pronouns in those three bulleted list items is entirely unwarranted.

Unless you meant to say that the discussion is somehow sanctimonious?  No, that doesn't make much sense.  I'm pretty sure that was you directing a personal insult at me.

It won't bother me if you don't see why that's a problem.



milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Dual Momentum Investing
« Reply #613 on: July 18, 2015, 01:46:22 AM »
It seems to me that you are carefully skirting the issue.

You are defending your legal phrasing but not the substance of your arguments.

It also seems to me that you are smart enough to know that

1.  Market timers don't always lose in the long run. (George Soros anyone?)

2.  Crowding causing a positive feedback mechanism in Relative momentum and DM investors benefitting from crowding are not the same thing at all (See reply 571).

3. You can't  know if DM will lose money long term.  (You might credibly hypothesize that there is an 80% chance of it not gaining as much money as a passive buy and hold equity portfolio by virtue of it being an active strategy and base rate probabilities, but if you really think it will lose money simply because it is active then you have badly misread the data. (If you do feel certain, then I will gladly bet you 100K that GEM will not lose money over a 10 year time horizon starting today. )

As to the moralistic/sanctimonious charge, when you argue that those that disagree with you are trying to make others lose money or profit off of them, while you are trying to steer the newbies to the one true way to successfully invest (which happens to be your chosen strategy) I feel that both sanctimonious and moralistic fit the bill quite well, although I'm willing to include some other adjectives that describe that sort of a message too: arrogant and presumptuous.   

Here is one of your quotes which I feel fits the bill:

"My only motivation for participating in this thread is the same one I feel in all threads about market timing, to discourage new readers from being misled into making decisions that will cost them money."

Finally in reading your replies it seems that one thing that has hampered the exchange of ideas here is that you haven't made the minimum effort to even understand the basic strategy which you criticize.

As an example in post number 555 you attempt to describe what "momentum traders" try to do. You claim we

1.  Seek to amplify short term volatility.

2.  Effectively short stocks that are down.

3. Are responsible for market inefficiency.

4.  Sector rotate to increase volatility between sectors.

I will simply point out that I am an admitted dual momentum practitioner and I do none of those things. (3 is a value judgement, the rest are black and white). (I have made exactly 1 trade in 9 months, don't trade sectors, and am long only....not exactly the ingredients for boosting short term volatility, shorting down stocks, or increasing intersector volatility.)

I know what buy and hold passive investing is and I endorse it, you clearly don't understand DM and presume to judge it.

Don't you see a problem there?
« Last Edit: July 18, 2015, 02:22:58 AM by milesdividendmd »
I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

EngiNerd

  • 5 O'Clock Shadow
  • *
  • Posts: 60
Re: Dual Momentum Investing
« Reply #614 on: July 18, 2015, 08:19:18 AM »
I too have enjoyed investigating this alternative investment strategy.  I have read most of the linked pdfs, miles' blog, the boglehead thread, and other articles but have not performed my own backtesting yet or read Gary's book.  To me it seems that accurate backtesting requires index fund data and that goes back to the early 90s, maybe early 70s (not really that long).  Then we can you use market indexes to more loosely match the strategy back even further, maybe the early 1900s.  Then the author and other researchers pointed to evidence that momentum has always has existed in every type of market, and use this claim to try and defend the timeless of the strategy (does support the concept of momentum but not so much the actual GEM strategy). 

There definitely seems to be evidence that there is momentum in the markets.  And I do not agree with complete EMH.  But like other critics I get a spidy sense that it's too easy, "there's no free lunch", and this strategy really does increases ROI and decrease draw downs it wouldn't take long for all the smart money to follow it.  I guess my one specific question for miles is: you indicate you prefer this investment strategy not for the increased gains but for the protection from losses.  However, for me it is easy to imagine a poorly timed flash crash that due to your look back period causes you to sell high and buy very low while 100% concentrated in an asset class.  And if this happened when you were retired it could effectively give you less purchasing power than if you had just stacked money in a bank account.  However, it is hard to imagine actually losing purchasing power through a balanced and diversified portfolio with rebalancing without the total economic collapse that would wipe out all strategies.  So is that the increased risk that balances out the reward for utilizing the momentum strategy?

Enginerd,

A flash crash with a rapid recovery is the worst case scenario for dual momentum, or really any trend following strategy.  There's really no way around that.

One can imagine ways of circumventing this scenario, but since there has been only one of these events that would have had any affect on a dual momentum strategy (1987)  in the entire history of the stock market, there is really no effective way of backtesting how such an circumvention would work.

Fortunately there has been only one such crash in the US stock market to date, versus dozens of bear markets.  Ie significant/flash crashes that erase 6 to 12 months of equity returns with rapid recoveries have historically been very rare.

Unfortunately, every approach has its own unique weakness(es.)

As an example domestically oriented equity-centric buy and hold does very poorly in prolonged equity bear markets, as Japanese investors learned in the post bubble era.

The best we can do is to pick our poison and stick to our strategy through thick and thin.

And I believe that knowing that such a worst case possibility exist before it happens, can be helpful in terms of sticking to one's approach when the shit hits the fan.

In terms of the retirement question, there's no reason for one to have to be 100% equities in retirement regardless of his/her approach.

One could implement a dual momentum strategy in which One half of ones portfolio toggled between total bond market/long term treasuries/short term treasuries, and the other half of your portfolio toggled between domestic equities/International  equities/short-term treasuries.

One thing is certain, I personally would be much more comfortable with a dual momentum approach in retirement then with a 100% equity portfolio. Betting that dual momentum will continue to have smaller drawdowns than a pure equity portfolio is not a longshot by any rational metric.


Right a Japan investor heavily invested in Japan equities would have been hurt badly by the decade long bear market.  However, a more balanced AA that includes foreign equities and bonds probably would have been alright and still came out ahead of inflation.  I agree that GEM has shown to decrease drawdowns and I understand believing it will in the future.  However, despite there being only 1 flash crash in market history, I still feel like it can be stated that the worst case scenario that would cause one strategy, Dual Momentum vs buy and hold indexing with diversity, to fail to beat inflation while the other one outperforms would be a flash crash wiping out the dual momentum investor.  Right now I suspect that it might be a good bet for superior gains to use a dual momentum strategy but if you're primary concern is security or to not actually losing purchasing power while investing I think a cost conscious buy and hold with diversity is still the way to go.  Your thoughts?

brooklynguy

  • Handlebar Stache
  • *****
  • Posts: 2072
  • Age: 36
Re: Dual Momentum Investing
« Reply #615 on: July 18, 2015, 08:31:07 AM »
This captures my thinking perfectly.

After plenty of consideration I believe in DM as a smart strategy that fits me well and I like my odds with it. (As evidenced by my skin in the game.)

But this was a leap of faith for me personally that I made after plenty of consideration, and study, and backtesting, and I have no desire (and am in fact afraid) to expose others to risking their money on my decision.

I am willing to pay for my own mistakes but want no responsibility for other people's.

If others come to the same (or different) conclusions from me I'm fine with it, but I don't really believe in advising others, because that presumes that I have the answers.

Lord knows I don't. I only have my own guesses.

Miles, it sounds to me like you are saying the same thing as sol in the quoted post (namely, that market-timing advice should come with a big disclaimer because it could fuck up peoples' shit, which is why passive indexing is your default recommendation, no?).

Crushtheturtle

  • 5 O'Clock Shadow
  • *
  • Posts: 51
Re: Dual Momentum Investing
« Reply #616 on: July 18, 2015, 08:49:30 AM »
^^^
People should conduct their own due diligence before enacting any particular investment strategy.

Therefore, advice doesn't need "disclaimers." If you assume the strategy, you assume the risk. Personal responsibility.

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Re: Dual Momentum Investing
« Reply #617 on: July 18, 2015, 08:57:23 AM »

I too have enjoyed investigating this alternative investment strategy.  I have read most of the linked pdfs, miles' blog, the boglehead thread, and other articles but have not performed my own backtesting yet or read Gary's book.  To me it seems that accurate backtesting requires index fund data and that goes back to the early 90s, maybe early 70s (not really that long).  Then we can you use market indexes to more loosely match the strategy back even further, maybe the early 1900s.  Then the author and other researchers pointed to evidence that momentum has always has existed in every type of market, and use this claim to try and defend the timeless of the strategy (does support the concept of momentum but not so much the actual GEM strategy). 

There definitely seems to be evidence that there is momentum in the markets.  And I do not agree with complete EMH.  But like other critics I get a spidy sense that it's too easy, "there's no free lunch", and this strategy really does increases ROI and decrease draw downs it wouldn't take long for all the smart money to follow it.  I guess my one specific question for miles is: you indicate you prefer this investment strategy not for the increased gains but for the protection from losses.  However, for me it is easy to imagine a poorly timed flash crash that due to your look back period causes you to sell high and buy very low while 100% concentrated in an asset class.  And if this happened when you were retired it could effectively give you less purchasing power than if you had just stacked money in a bank account.  However, it is hard to imagine actually losing purchasing power through a balanced and diversified portfolio with rebalancing without the total economic collapse that would wipe out all strategies.  So is that the increased risk that balances out the reward for utilizing the momentum strategy?

Enginerd,

A flash crash with a rapid recovery is the worst case scenario for dual momentum, or really any trend following strategy.  There's really no way around that.

One can imagine ways of circumventing this scenario, but since there has been only one of these events that would have had any affect on a dual momentum strategy (1987)  in the entire history of the stock market, there is really no effective way of backtesting how such an circumvention would work.

Fortunately there has been only one such crash in the US stock market to date, versus dozens of bear markets.  Ie significant/flash crashes that erase 6 to 12 months of equity returns with rapid recoveries have historically been very rare.

Unfortunately, every approach has its own unique weakness(es.)

As an example domestically oriented equity-centric buy and hold does very poorly in prolonged equity bear markets, as Japanese investors learned in the post bubble era.

The best we can do is to pick our poison and stick to our strategy through thick and thin.

And I believe that knowing that such a worst case possibility exist before it happens, can be helpful in terms of sticking to one's approach when the shit hits the fan.

In terms of the retirement question, there's no reason for one to have to be 100% equities in retirement regardless of his/her approach.

One could implement a dual momentum strategy in which One half of ones portfolio toggled between total bond market/long term treasuries/short term treasuries, and the other half of your portfolio toggled between domestic equities/International  equities/short-term treasuries.

One thing is certain, I personally would be much more comfortable with a dual momentum approach in retirement then with a 100% equity portfolio. Betting that dual momentum will continue to have smaller drawdowns than a pure equity portfolio is not a longshot by any rational metric.


Right a Japan investor heavily invested in Japan equities would have been hurt badly by the decade long bear market.  However, a more balanced AA that includes foreign equities and bonds probably would have been alright and still came out ahead of inflation.  I agree that GEM has shown to decrease drawdowns and I understand believing it will in the future.  However, despite there being only 1 flash crash in market history, I still feel like it can be stated that the worst case scenario that would cause one strategy, Dual Momentum vs buy and hold indexing with diversity, to fail to beat inflation while the other one outperforms would be a flash crash wiping out the dual momentum investor.  Right now I suspect that it might be a good bet for superior gains to use a dual momentum strategy but if you're primary concern is security or to not actually losing purchasing power while investing I think a cost conscious buy and hold with diversity is still the way to go.  Your thoughts?

A couple of thoughts.

A flash crash hurts DM specifically not because of the crash itself which effects equity investors equally but because of the missed months of an early recovery. In a flash crash followed by a bear market the DM investor will come out way ahead.

Note also that the drawdown is no worse for a DM investor in a flash crash then it is for an long only equity investor.

This flash crash/early recovery scenario is very specific indeed. It is literally one possibility out of millions.

Could it happen again? Absolutely. Could I survive it and stick to the plan? I think so. Does it keep me up at night?  No.

I think if that you want the safest possible portfolio then diversification is absolutely key. Something like the permanent portfolio comes to mind with 25% equity(I favor weighted to region by world capitalization) , 25% gold, 25 % long term treasuries, 25% short term treasuries/cash. The upside with such an approach is diversification and very stable returns in diverse environments.  The downside is lost upside.

So you can always find a safer strategy or one with more upside. In this sense there is no free ride.

But I am comfortable with the risk of DM personally because it allows me to take on a large amount of expected beta with a disproportionately small amount of expected volatility.

What I am deathly afraid in investing are risks that kick me out of the game altogether. (I don't want to blow up.) This is why I am allergic to leverage, and why buy and hold 100% equities would not be comfortable for me, personally.

Finally as I mentioned before you can diversify as much as you want within a DM approach. 1/4 of your portfolio could be exposed to equity risk, 1/4 to inflation risk, 1/4 to credit risk, and 1/4 to safe assets if you wanted. So I see this diversification question as quite separate from the DM vs buy and hold question.

I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Re: Dual Momentum Investing
« Reply #618 on: July 18, 2015, 09:15:28 AM »

This captures my thinking perfectly.

After plenty of consideration I believe in DM as a smart strategy that fits me well and I like my odds with it. (As evidenced by my skin in the game.)

But this was a leap of faith for me personally that I made after plenty of consideration, and study, and backtesting, and I have no desire (and am in fact afraid) to expose others to risking their money on my decision.

I am willing to pay for my own mistakes but want no responsibility for other people's.

If others come to the same (or different) conclusions from me I'm fine with it, but I don't really believe in advising others, because that presumes that I have the answers.

Lord knows I don't. I only have my own guesses.

Miles, it sounds to me like you are saying the same thing as sol in the quoted post (namely, that market-timing advice should come with a big disclaimer because it could fuck up peoples' shit, which is why passive indexing is your default recommendation, no?).

I completely agree Brooklyn. I have made that disclaimer over and over again.

What I disagree with are the mischaracterizations others (my) ethics, and  motivations.

I feel it is ethical for me to share my approach and my thinking about investment, but unwise for me to recommend my approach for others since them losing money confers no risk to me. It's enough to just share the facts and let them speak for themselves.

I also have a problem with the overstating of the benefits of passive investment and the risks of active investing.

It's enough to say active investment underperforms passive 80%of the time.

It is unnecessary and demonstrably inaccurate to say that an active approach "always loses."

Finally I have a problem with this urge to censor others thinking.

It's enough for us to honestly share our thinking and to let the thoughts speak for themselves.

No one has a monopoly on the truth and hearing thoughtful people who disagree with you is generally healthy and good.

I reject the notion that there are newbies out there who have to be given a consistent message of what is right and wrong for fear of being led astray.

That to me is the ultimate condescension.
I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Re: Dual Momentum Investing
« Reply #619 on: July 18, 2015, 09:30:32 AM »
Also don't you think that there is a distinction to be drawn between making an honest disclaimer and saying that I am "trying to fuck (other's) shit up?"

In addition to being insulting, it's completely implausible. What possible motivation could I have for such a thing other than sociopathy?
I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 24895
  • Age: -999
  • Location: Traveling the World
Re: Dual Momentum Investing
« Reply #620 on: July 18, 2015, 10:42:27 AM »
I don't think you have a motivation to harm other's returns, but I do think it is what will be done, even inadvertently, when newbies to investing see threads about active investing and decide it's the new best thing that they should be doing.

3. You can't  know if DM will lose money long term.  (You might credibly hypothesize that there is an 80% chance of it not gaining as much money as a passive buy and hold equity portfolio by virtue of it being an active strategy and base rate probabilities, but if you really think it will lose money simply because it is active then you have badly misread the data. (If you do feel certain, then I will gladly bet you 100K that GEM will not lose money over a 10 year time horizon starting today. )

This is a stupid straw man.  Obviously he meant make less than the comparable index.  Nitpicking on the word choice of "lose money" when we all know what is meant only weakens the rest of your post.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with a kid.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (occasionally) blog at AdventuringAlong.com.
You can also read my forum "Journal."

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Re: Dual Momentum Investing
« Reply #621 on: July 18, 2015, 12:23:34 PM »
It's not a straw man. It is one of a number of forcefully delivered flat out wrong declarations.

He repeatedly makes the claim that "market timers always lose," when they clearly don't.

His assumption seems to actually be that market timers always lose. He makes this point repeatedly.

It is obviously not true.

His description of "momentum traders" is a pure fantasy that bears no resemblance to the actual strategy that we are discussing.

Who's to say he doesn't believe that "market timers" lose money?

I'll let him tell us whether or not he was being deliberately or accidentally innaccurate with his language or whether or not he actually believes this stuff.

I'm not playing word games I'm responding to his repeatedly innaccurate statements.

If it's simply a typo he can own it and we can move on to discuss the disagreements that we actually have.
I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 24895
  • Age: -999
  • Location: Traveling the World
Dual Momentum Investing
« Reply #622 on: July 18, 2015, 01:42:04 PM »
And I repeat:
This is a stupid straw man.  Obviously he meant make less than the comparable index.  Nitpicking on the word choice of "lose money" when we all know what is meant only weakens the rest of your post.

That is losing. It doesn't mean they lose money, but that they lose in comparison. It's pretty obvious to anyone familiar with the debate of market timing versus not, so trying to claim he's saying something he's not (that they always lose money) is disingenuous.

They lose relative to a comparable benchmark.
« Last Edit: July 18, 2015, 01:44:10 PM by arebelspy »
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with a kid.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (occasionally) blog at AdventuringAlong.com.
You can also read my forum "Journal."

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Dual Momentum Investing
« Reply #623 on: July 18, 2015, 02:13:06 PM »
Repeat all you like. Here is what he in fact said.

"When I said you're fucking up their shit, I meant they will lose money if they follow the strategy."

Now you can interpret that any way you want. Maybe he meant they will lose money relative to an index, maybe he meant what he actually said, which is something entirely different.
 
If I give you 2 dollars instead of the 3 I give your neighbor you have not lost money by any reasonable definition.

You have an opinion that he meant something different from what he said for whatever reason.

I will gladly take Sol at face value if he in fact meant something different from what he said. But you repeating your own interpretation changes nothing.

A straw man argument is when you argue against an argument that was not made, not when you argue against an argument that was made poorly or imprecisely. So either way it is not a straw man argument.

Maybe you meant something else?
I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Dual Momentum Investing
« Reply #624 on: July 18, 2015, 02:26:48 PM »
The other point is that even if your interpretation is correct and he did mean lose relative to an index, rather than what he actually said, the statement is still wrong since,

A.  No one knows the future

And

B. 20 % of active investors have historically beat the market over long time horizons. (10 years.)
I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

innerscorecard

  • Pencil Stache
  • ****
  • Posts: 590
    • Inner Scorecard - Where financial independence, value investing and life meet
Inner Scorecard - Where financial independence, value investing and life meet: http://www.innerscorecard.co/

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Dual Momentum Investing
« Reply #626 on: July 22, 2015, 11:36:01 PM »
Definitely interesting.

The take home is that one should stay invested as long as there is positive momentum OR fair valuation based on simple market signals. (200 day MA and 1/CAPE - inflation. )

Based on backtesting,  DM has been more successful historically.

This approach does diversify between 2 winning approaches however, which is attractive.
I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

bdbrooks

  • 5 O'Clock Shadow
  • *
  • Posts: 60
Re: Dual Momentum Investing
« Reply #627 on: July 24, 2015, 09:22:24 AM »
Based on backtesting,  DM has been more successful historically.

This was only the market timing piece of it. You could still use relative momentum. To make a far comparison, you would need to compare absolute momentum vs (value and momentum timing) for the same asset (S&P 500) over the same time period. I bet that the combination has done better than absolute momentum over the long haul. While testing you may as well look at testing value and absolute momentum together (instead of value and 200 day MA momentum). I might do this sometime in the next few days if I can find time. Wouldn't be hard. All you need is CAPE data and S&P 500 price data.

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Re: Dual Momentum Investing
« Reply #628 on: July 24, 2015, 06:56:24 PM »

Based on backtesting,  DM has been more successful historically.

This was only the market timing piece of it. You could still use relative momentum. To make a far comparison, you would need to compare absolute momentum vs (value and momentum timing) for the same asset (S&P 500) over the same time period. I bet that the combination has done better than absolute momentum over the long haul. While testing you may as well look at testing value and absolute momentum together (instead of value and 200 day MA momentum). I might do this sometime in the next few days if I can find time. Wouldn't be hard. All you need is CAPE data and S&P 500 price data.

BD,

To add relative momentum to the mix you would have to include another asset class like foreign developed.

So it would end up meaning that if s&p and vea both performed below their 200 day MA (or short term treasuries for the look back period) but both were at fair cape value you would stay invested in the more momentous asset.

I doubt this would add much value and it would be hard to model with the tools I have available, but it would be interesting to see the results.
I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Re: Dual Momentum Investing
« Reply #629 on: August 10, 2015, 11:33:44 AM »
Nice post today from Antonacci on robustness....

http://www.dualmomentum.net/2015/08/bring-data.html?m=1
I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

starguru

  • Pencil Stache
  • ****
  • Posts: 554
Re: Dual Momentum Investing
« Reply #630 on: August 13, 2015, 02:02:28 PM »
I have a few questions about the blog post where you explain the DM strategy.

1.  Why are you not using all vanguard funds?
2.  Why use an SP500 index instead of a total US market index? 
3.  Can a total bond fund replace short term treasuries? Why?
4.  Is there a page that indicates what the current indicated asset is?

« Last Edit: August 13, 2015, 02:04:59 PM by starguru »

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Re: Dual Momentum Investing
« Reply #631 on: August 13, 2015, 02:58:28 PM »
1.  My 403B is throgh fidelity.  No vanguard international fund is available to me.
2.  Yes, should be a small difference.
3.  Antonacci uses total bond for his global equities momentum for unstated reasons.  (should be higher returns with inccreased volatility).  I use short term treasuries.
4.  Not on my site.  But it's been sitting in FSPNX (fidelity spartan international fund for 4 months now.

I use this perf charts on this site site to determine elections for the month:

http://stockcharts.com/freecharts/

I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

starguru

  • Pencil Stache
  • ****
  • Posts: 554
Re: Dual Momentum Investing
« Reply #632 on: August 13, 2015, 03:06:26 PM »
1.  My 403B is throgh fidelity.  No vanguard international fund is available to me.
2.  Yes, should be a small difference.
3.  Antonacci uses total bond for his global equities momentum for unstated reasons.  (should be higher returns with inccreased volatility).  I use short term treasuries.
4.  Not on my site.  But it's been sitting in FSPNX (fidelity spartan international fund for 4 months now.

I use this perf charts on this site site to determine elections for the month:

http://stockcharts.com/freecharts/

Don't the spartan funds have short term (<90days) redemption fees?  How does that affect this strategy?  Also, is there any significance to checking every month?  What about every quarter, or every week?

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Re: Dual Momentum Investing
« Reply #633 on: August 13, 2015, 03:21:17 PM »
Spartan funds do, which is problematic.  Fortunately trades are rare, but it would certainly bite if the markets were to tank 1 month after investing in FSPNX.  I have no other low cost international options available in my 403B unfortunately.

The best brokerage for DM is Schwab, IMHO, because their >200 fee free ETFs have no minimum hold periods.  Their index funds are also usually a touch cheaper than Vanguard too.

That's a really good question about checking quarterly or bimonthly.  I have not modeled it myself, but my guess is that there would be less slightly trading and slightly larger drawdowns.
I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

starguru

  • Pencil Stache
  • ****
  • Posts: 554
Re: Dual Momentum Investing
« Reply #634 on: August 13, 2015, 05:56:02 PM »
Spartan funds do, which is problematic.  Fortunately trades are rare, but it would certainly bite if the markets were to tank 1 month after investing in FSPNX.  I have no other low cost international options available in my 403B unfortunately.

The best brokerage for DM is Schwab, IMHO, because their >200 fee free ETFs have no minimum hold periods.  Their index funds are also usually a touch cheaper than Vanguard too.

That's a really good question about checking quarterly or bimonthly.  I have not modeled it myself, but my guess is that there would be less slightly trading and slightly larger drawdowns.

The idea is pretty interesting.  Why limit the signal funds to just the 4 though?  Why not go by sector?  Or add gold to the mix? REITs? 

EDIT - and why a 6 month lookback?  And I assume the test is

for each signal fund, take the price today, and the price 6 months ago, and subtract todays value from six months ago value.  The signal fund with the best differential wins?

« Last Edit: August 13, 2015, 06:03:19 PM by starguru »

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Dual Momentum Investing
« Reply #635 on: August 13, 2015, 06:17:50 PM »
Spartan funds do, which is problematic.  Fortunately trades are rare, but it would certainly bite if the markets were to tank 1 month after investing in FSPNX.  I have no other low cost international options available in my 403B unfortunately.

The best brokerage for DM is Schwab, IMHO, because their >200 fee free ETFs have no minimum hold periods.  Their index funds are also usually a touch cheaper than Vanguard too.

That's a really good question about checking quarterly or bimonthly.  I have not modeled it myself, but my guess is that there would be less slightly trading and slightly larger drawdowns.



The idea is pretty interesting.  Why limit the signal funds to just the 4 though?  Why not go by sector?  Or add gold to the mix? REITs? 

EDIT - and why a 6 month lookback?  And I assume the test is

for each signal fund, take the price today, and the price 6 months ago, and subtract todays value from six months ago value.  The signal fund with the best differential wins?

No reason at all.

In his book, Antonacci details DMSR which is a sector rotation strategy, as well as a diversified portfolio strategy that includes mortgage REIT/commercial REIT, Gold/long term treasuries, total bond/high yield buckets with cash filters. 

I chose 6 months for no great reason.  In general shorter lookbacks mean quicker exits from and entrances to bear/bull markets and more trading.  I thought it would be behaviorally easier for me to stick to the shorter lookback. 

I now think the smartest method would be to split your portfolio into 3-4 look back periods and manage each quarter/third seperately.  This should diversify away lookback period specific whipsaw risk, (which admittedly rarely happens.)

Antonacci advocates a 12 month lookback.

In back testing anything betwen 3 and 12 months gives you very similar results. 

If you're interested in the strategy,I highly recommend Gary's book.  It's a great resource.

His blog optimal momentum has a ton of great content as well.
« Last Edit: August 13, 2015, 11:43:46 PM by milesdividendmd »
I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Dual Momentum Investing
« Reply #636 on: August 14, 2015, 01:21:00 AM »
http://blog.alphaarchitect.com/2015/08/13/avoiding-the-big-drawdown-is-downside-protection-helpful-or-heresy/

Really nice review of both trend following and absolute momentum (and a combo of the 2) for downside protection.

I particularly enjoyed the discussion  of the variability of risk tolerance in investors (which seems to be using a form of recency bias) to explain negative momentum. New (to me) behavioral story for such approaches.

Also nice robustness testing.
I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

peterpatch

  • Stubble
  • **
  • Posts: 101
Re: Dual Momentum Investing
« Reply #637 on: August 14, 2015, 06:03:15 PM »
I was involved a thread that was about dividend growth investing and MDM came along and mentioned trending as an investing factor.

In that thread I mentioned that trending did not seem to have clear cause, it seemed that it might be a case of confusing causation with co-relation. That was my first impression. I make it a personal policy to read broadly and in particular to read about concepts and ideas that I find lacking at first glance. Often my first inclinations are right, but sometimes it turns out they are false and this was one of those times. Sometimes I'll read something that is 90% junk but then the author stumbles upon a gem which makes the 90% junk worthwhile.

I did research on relative momentum and found out about the strong statistical anomaly that is relative momentum. This has been researched and confirmed by numerous academic studies. It is pervasive and has occurred across asset classes and markets.

I also did research on absolute momentum and there is also very strong empirical evidence for it across asset classes and markets.


I think it's important to educate oneself on the source literature of a topic before taking a position. My position is that momentum works due to a variety of behavioural biases that act together to create the momentum anomaly. Chapter 4 of the book "Dual momentum Investing" provides an excellent overview of the biases which I list below:

• Anchoring, insufficient adjustment, underreaction

        •    Confirmation bias

        •    Herding, feedback trading, overreaction

        •    Conservatism, representativeness

        •    Overconfidence, self-attribution

        •    Slow diffusion of information

        •    Disposition effect

Although I am not going to go into all the details of the concept in this thread , I think the argument Antonacci makes for Dual momentum is extremely compelling and that any serious investor should at least read his book before casting judgement. This book is more like 90% good/great and 10% so-so with very little bad. The market history alone made it a great read but there is so much more.

Also thanks to MDM for prodding me about the momentum effect, I'll be implementing GEM with about half my portfolio soon.
« Last Edit: August 14, 2015, 06:34:39 PM by peterpatch »

starguru

  • Pencil Stache
  • ****
  • Posts: 554
Re: Dual Momentum Investing
« Reply #638 on: August 17, 2015, 08:43:13 PM »
miles

Im writing a program that graphs the 6 month lookback of the funds as you prescribe in your blog.  I believe I see the last 4 months being on DFALX, but very recently everything dipped below the show term treasury (SP500 is very close, too close for me to tell from graph alone).

Is that what you are seeing?

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Re: Dual Momentum Investing
« Reply #639 on: August 17, 2015, 10:22:32 PM »
Star guru.

The funds I have at my disposal in my retirement accounts are FSPNX for international developed and VIIIX for s&p.

I've been sitting in FSPNX for 4 months, and s & p is gaining.

I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

starguru

  • Pencil Stache
  • ****
  • Posts: 554
Re: Dual Momentum Investing
« Reply #640 on: August 18, 2015, 07:05:37 AM »
Star guru.

The funds I have at my disposal in my retirement accounts are FSPNX for international developed and VIIIX for s&p.

I've been sitting in FSPNX for 4 months, and s & p is gaining.

Yeah Im not sure it matters which funds one uses as long as they track their index properly.  Interesting problem trying to put the algorithm into code:  what happens when the six month lookback for a day is a non-market day?  Currently I am ignoring those days, but that means days like yesterday have no data.


milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Re: Dual Momentum Investing
« Reply #641 on: August 18, 2015, 03:17:00 PM »
100% agree. If its cheap and it tracks the same index, any fund should do.

Can't you just write your code for the last trading day of the month's close?
I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

starguru

  • Pencil Stache
  • ****
  • Posts: 554
Re: Dual Momentum Investing
« Reply #642 on: August 18, 2015, 04:00:42 PM »
100% agree. If its cheap and it tracks the same index, any fund should do.

Can't you just write your code for the last trading day of the month's close?

I thought it would be interesting to track the signal day by day so I could see how it moves.  I am going to try and make the graph look better, as well as show more information like the boundary days.


starguru

  • Pencil Stache
  • ****
  • Posts: 554
Re: Dual Momentum Investing
« Reply #643 on: August 18, 2015, 07:49:40 PM »
100% agree. If its cheap and it tracks the same index, any fund should do.

Can't you just write your code for the last trading day of the month's close?

How exactly do you do the look-back?  So at the end of August, do you

1)  look on the last day of February (back 6 months)?
2)  Or do you go back exactly 7*26 days, which might not be the same day as "last of feb"?   
3)  Or do you just take the last trading day of the six months ago month (e.g. last trading day of Aug against last trading day of Feb, whatever the dates)?

Also, Im calculating performance as 

(currentClosingPrice - sixMonthsAgoClosingPrice) / sixMonthsAgoClosingPrice

does that make sense?

milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Re: Dual Momentum Investing
« Reply #644 on: August 18, 2015, 08:23:29 PM »
I use perfcharts on

http://stockcharts.com/

This calculates total returns (including dividends).

I toggle from the six months bar and manually adjust it to the last trading day 6 months ago (ie at the end of August I calculate back to the last trading day in February.)

Including dividends in your look back is very important, I think I'm that dividends in cheap markets will be higher than in expensive markets.

I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

starguru

  • Pencil Stache
  • ****
  • Posts: 554
Re: Dual Momentum Investing
« Reply #645 on: August 18, 2015, 08:37:31 PM »
I use perfcharts on

http://stockcharts.com/

This calculates total returns (including dividends).

I toggle from the six months bar and manually adjust it to the last trading day 6 months ago (ie at the end of August I calculate back to the last trading day in February.)

Including dividends in your look back is very important, I think I'm that dividends in cheap markets will be higher than in expensive markets.

I wonder how they calculate their data.  Are all the values relative to the start day, or is every day computed against whatever day was 6 months before.  So are they doing

dayN - day0 where day0 is 6 months before the last day
or
dayN - dayN-6months?


So on the last day of a month you go to something like this and just pick the fund with the highest value against the right axis?



milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Re: Dual Momentum Investing
« Reply #646 on: August 18, 2015, 09:50:22 PM »
They do it by trading days, but you can adjust the bar to cover more or less days to make day 1 coincide with the last day of the trading month in question.
I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

K-ice

  • Pencil Stache
  • ****
  • Posts: 651
  • Location: Canada
Re: Dual Momentum Investing
« Reply #647 on: August 19, 2015, 01:14:01 AM »
I like the idea of this momentum thing. It always kind of bothered me to invest in something that is performing poorly. I may not throw 100% into it but it is worth doing some of my own calculations.

I tried to read through a lot of the posts & two linked papers but couldn't find the answer to this basic question.

How is the 6 month look back calculated?

Is it: (Stock value at month 7- stock value at month 1)/ stock value at month 1
(basically ignoring what happens in the middle) Brief format  (7-1)/1

Or is it:

 the average of months (7-6)/6 , (6-5)/5 .... (2-1)/1  for 6 months.

Thanks


milesdividendmd

  • Handlebar Stache
  • *****
  • Posts: 1913
  • Location: Portlandia
    • Miles Dividend MD
Re: Dual Momentum Investing
« Reply #648 on: August 19, 2015, 08:39:45 AM »
Total returns now (stock price plus dividends) minus stock price 6 months ago.
I can teach you to play the miles game in 30 days.  http://www.travelmiles101.com/travel-rewards-course-registration.  (A free course by mustachians for mustachians)

starguru

  • Pencil Stache
  • ****
  • Posts: 554
Re: Dual Momentum Investing
« Reply #649 on: August 19, 2015, 12:07:43 PM »
Total returns now (stock price plus dividends) minus stock price 6 months ago.

Yeah im not sure i can get the total returns, i think these datasets are simply limited to stock price.