Momentum Investing Review
It’s been more than a year since we reviewed various momentum investing portfolios/funds (see July 27, 2015: Performance Dispersion Among Momentum Based Portfolios). As markets have persistently behaved in some strange way, we would like to review these portfolios again.
Just to recall, the taxonomy of these portfolios is as follows:
- m1: A group of individual stocks such as Dow Jones 30 or Nasdaq 100 etc. — Can be Effective, but volatile.
- m2: A group of industrial stock funds such as Fidelity’s famous Fidelity Select funds. – Can be Effective, but volatile.
- m3: A group of stock sector funds such as SPDR’s S&P sector ETFs such as SPDR Select Energy (XLE) etc. – Can be Effective, but volatile.
- m4: A group of stock style funds such as Russell large, mid and small cap stock ETFs. – Effective and comparable risk.
- m5: single stock index (fund) buy/sell decision. – Fickle though might be on par with buy and hold.
- m6: A group of diversified and somewhat uncorrelated asset classes such as stocks, bonds, real estates (REITs) and their minor asset classes such as long term bonds, international bonds, gold etc. – Effective and lower risk.
Furthermore, at MyPlanIQ, we always advocate the momentum driven strategy at asset allocation level, or m6 in the above categories. This is what our Tactical Asset Allocation(TAA) strategy is based on.
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