Dual Momentum Investors Still Invested In Bonds

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Includes: BIV, BND, SHY, TLT, VTI
by: Lowell Herr

Summary

Dual Momentum recommends 100% invested in BIV.

Equities still out of favor.

Diversify using Swensen Six or Baker's Dozen.

As January is coming to a close, dual momentum (DM) investors are still dedicating 100% of their portfolio to bonds. Below are the DM recommendations based on a few basic principles.

  • Neither VTI or VEU are outperforming SHY so we move to bonds.
  • BIV is the highest ranking bond ETF so 100% of the portfolio is invested in this ETF.

Click to enlarge

In this example I included three bond options; BIV, TLT and BND even though the DM model recommends investing in only one. The look-back period was one-year or 252 trading days.

Had either VTI or VEU ranked above SHY we would invest 100% of the portfolio in the highest ranked ETF. That is where relative momentum comes into play. While the DM model concentrates on three asset classes, investors desiring additional diversity will be attracted to options such as the "Swensen Six" or Baker's Dozen.

Disclosure: I am/we are long BIV.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.