How do you account for the above conclusions stated in the article?

Lowell]]>

How do you account for the above conclusions stated in the article?

Lowell]]>

If you find the Dual Momentum portfolio of interest, you may also want to look at the Baker's Dozen as shown here.

http://bit.ly/1nKEbof

Lowell]]>

If you find the Dual Momentum portfolio of interest, you may also want to look at the Baker's Dozen as shown here.

http://bit.ly/1nKEbof

Lowell]]>

The 20% weight to volatility is related strictly to the ranking process. Three metrics go into ranking the securities (ETFs). 1) 50% is allocated to the performance over the most recent 60 trading days. 2) 30% is assigned to the performance over the most recent 100 trading days. 3) 20% is allocated to the volatility of the security. We are looking for low volatile ETFs. This is how the ETFs are ranked and based on that ranking, the tranche momentum model comes up with a recommended portfolio.

The Tranche worksheet does all the calculations that recommends what ETFs to hold and in what percentage. The 20% weight assigned to volatility is separate from the momentum (or portfolio) recommendations. I think this is where the confusion originates.

Lowell]]>

The 20% weight to volatility is related strictly to the ranking process. Three metrics go into ranking the securities (ETFs). 1) 50% is allocated to the performance over the most recent 60 trading days. 2) 30% is assigned to the performance over the most recent 100 trading days. 3) 20% is allocated to the volatility of the security. We are looking for low volatile ETFs. This is how the ETFs are ranked and based on that ranking, the tranche momentum model comes up with a recommended portfolio.

The Tranche worksheet does all the calculations that recommends what ETFs to hold and in what percentage. The 20% weight assigned to volatility is separate from the momentum (or portfolio) recommendations. I think this is where the confusion originates.

Lowell]]>

Lowell]]>

Lowell]]>

http://bit.ly/1ZMIW1R

Lowell]]>

http://bit.ly/1ZMIW1R

Lowell]]>

No, the recommendation is to have 100% invested if the ETFs are ranked above SHY. With the tranche model, the portfolio is most likely spread out over more than two ETFs.

Keep in mind that in the Main Menu, one can specify more ETFs be included in the portfolio so long as they are performing above SHY. In our research we found that two ETFs per portfolio work best.

In the above example, the allocations add up to 100%.

Lowell

http://itawealth.com

Lowell]]>

No, the recommendation is to have 100% invested if the ETFs are ranked above SHY. With the tranche model, the portfolio is most likely spread out over more than two ETFs.

Keep in mind that in the Main Menu, one can specify more ETFs be included in the portfolio so long as they are performing above SHY. In our research we found that two ETFs per portfolio work best.

In the above example, the allocations add up to 100%.

Lowell

http://itawealth.com

Lowell]]>

Let me see if I can explain what is going on. Each security (ETFs in this example) are ranked using three metrics - 60 and 100 trading days, and volatility. If using the Momentum Model, invest in the top two ranked ETFs, but only if they are outperforming SHY. I don't pay attention to the volatility of the ETF. I'm only interested in knowing if it is outperforming SHY. Volatility receives a 20% weight in all situations.

Now if one is using the Tranche Momentum model, the portfolio will most likely contain more than two ETFs, but this depends on the rankings based on the number of portfolio offsets.

Lowell]]>

Let me see if I can explain what is going on. Each security (ETFs in this example) are ranked using three metrics - 60 and 100 trading days, and volatility. If using the Momentum Model, invest in the top two ranked ETFs, but only if they are outperforming SHY. I don't pay attention to the volatility of the ETF. I'm only interested in knowing if it is outperforming SHY. Volatility receives a 20% weight in all situations.

Now if one is using the Tranche Momentum model, the portfolio will most likely contain more than two ETFs, but this depends on the rankings based on the number of portfolio offsets.

Lowell]]>

Yes, we spent a lot of time last summer testing various "Dual Momentum" models. As for the weighting, each security selected for potential investment is weighted. What I am using now is 50% to the most recent 60 trading days, 30% weight to the most recent 100 trading days, and a 20% weight assigned to volatility. The volatility I am currently using is a 10-day standard deviation calculation.

The outcome from the Tranche model shows how the ETFs are ranked on past days and this is done to minimize the "luck-of-review-day."

Does this answer your question?

Lowell

http://itawealth.com]]>

Yes, we spent a lot of time last summer testing various "Dual Momentum" models. As for the weighting, each security selected for potential investment is weighted. What I am using now is 50% to the most recent 60 trading days, 30% weight to the most recent 100 trading days, and a 20% weight assigned to volatility. The volatility I am currently using is a 10-day standard deviation calculation.

The outcome from the Tranche model shows how the ETFs are ranked on past days and this is done to minimize the "luck-of-review-day."

Does this answer your question?

Lowell

http://itawealth.com]]>

Lowell]]>

Lowell]]>

I disagree. Momentum works very well in bear markets as the model moves investors out of equity holdings. You might take a look at this information.

http://bit.ly/1KyVFY1

Lowell

http://itawealth.com]]>

I disagree. Momentum works very well in bear markets as the model moves investors out of equity holdings. You might take a look at this information.

http://bit.ly/1KyVFY1

Lowell

http://itawealth.com]]>

I don't want to get into the details or the code of the spreadsheet. Thirty-six months of data are used in the calculations and that may be a reason for the differences.

Lowell

http://itawealth.com]]>

I don't want to get into the details or the code of the spreadsheet. Thirty-six months of data are used in the calculations and that may be a reason for the differences.

Lowell

http://itawealth.com]]>

Correct. I was following David Swensen's recommendations as described in his book, Unconventional Success.

Lowell]]>

Correct. I was following David Swensen's recommendations as described in his book, Unconventional Success.

Lowell]]>

Lowell]]>

Lowell]]>

No, the model is not only for retirees. In fact my grandson is using this model.

The model is designed to keep one out of deep bear markets - the kind that are statistically to occur only every 300 years according to Mandelbrot, but which actually occur more frequently.

What you see above is a variation of Gary Antonacci's Dual Momentum model. In the tranche model, risk aversion is front and center.

Lowell

http://itawealth.com]]>

No, the model is not only for retirees. In fact my grandson is using this model.

The model is designed to keep one out of deep bear markets - the kind that are statistically to occur only every 300 years according to Mandelbrot, but which actually occur more frequently.

What you see above is a variation of Gary Antonacci's Dual Momentum model. In the tranche model, risk aversion is front and center.

Lowell

http://itawealth.com]]>

And what do you do when the market turns around? The model I'm using addresses that situation.

Lowell

http://itawealth.com]]>

And what do you do when the market turns around? The model I'm using addresses that situation.

Lowell

http://itawealth.com]]>

Excellent question. There is an algorithm used to rank the ETFs in the portfolio and the metrics use a 60- and 100-trading day look-back periods plus volatility. In the above example, I set the Offset Portfolios to 12. What the software does is take the most recent data to come up with the first portfolio offset. Then it goes back one trading day and ranks the ETFs to come up with what would have been the ranking last Thursday or the second offset. If you look at the 7th portfolio offset you will see three ETFs recommended - VNQ, QQQ, and MTUM. There was a tie involved and that is the reason three ETFs were recommended. Go to the 12th offset portfolio and you see VNQ and TLT recommended.

Based on the number of times an ETF was recommended over the past 12 trading days, the spreadsheet calculates the percentage to invest in each ETF and what that works out to in the number of shares.

I just posted this Instablog (see below) and at the end of the post I referenced a YouTube video where I explain how the Kipling Tranche spreadsheet works. At least it explains in part what it does for the investor.

http://seekingalpha.co...

Lowell

http://itawealth.com]]>

Excellent question. There is an algorithm used to rank the ETFs in the portfolio and the metrics use a 60- and 100-trading day look-back periods plus volatility. In the above example, I set the Offset Portfolios to 12. What the software does is take the most recent data to come up with the first portfolio offset. Then it goes back one trading day and ranks the ETFs to come up with what would have been the ranking last Thursday or the second offset. If you look at the 7th portfolio offset you will see three ETFs recommended - VNQ, QQQ, and MTUM. There was a tie involved and that is the reason three ETFs were recommended. Go to the 12th offset portfolio and you see VNQ and TLT recommended.

Based on the number of times an ETF was recommended over the past 12 trading days, the spreadsheet calculates the percentage to invest in each ETF and what that works out to in the number of shares.

I just posted this Instablog (see below) and at the end of the post I referenced a YouTube video where I explain how the Kipling Tranche spreadsheet works. At least it explains in part what it does for the investor.

http://seekingalpha.co...

Lowell

http://itawealth.com]]>

http://bit.ly/1D1iqlf

I've written several articles on SA on this subject. It does help to understand the momentum model as the Tranche Model is a subset of the basic Momentum Model.

Lowell]]>

http://bit.ly/1D1iqlf

I've written several articles on SA on this subject. It does help to understand the momentum model as the Tranche Model is a subset of the basic Momentum Model.

Lowell]]>

I've used SDS, and ultra short ETF, but one needs to make some adjustments within the software to account for the volatility metric. So far I've not been all that successful using short ETFs. I don't recall where any of our back-tests supported using short ETFs.

Lowell

http://itawealth.com]]>

I've used SDS, and ultra short ETF, but one needs to make some adjustments within the software to account for the volatility metric. So far I've not been all that successful using short ETFs. I don't recall where any of our back-tests supported using short ETFs.

Lowell

http://itawealth.com]]>

You managed to select a period advantages to ED. Try going back into the 1990s.

Lowell

http://itawealth.com]]>

You managed to select a period advantages to ED. Try going back into the 1990s.

Lowell

http://itawealth.com]]>

Please explain this reasoning.

Lowell]]>

Please explain this reasoning.

Lowell]]>

http://bit.ly/1S2EvLE

Lowell]]>

http://bit.ly/1S2EvLE

Lowell]]>

http://bit.ly/1VFDc4i

For a summary of this article, check out this blog post.

http://bit.ly/1VFDc4j

Lowell]]>

http://bit.ly/1VFDc4i

For a summary of this article, check out this blog post.

http://bit.ly/1VFDc4j

Lowell]]>

That first sentence says it all.

Lowell]]>

That first sentence says it all.

Lowell]]>

"Although 2015 wasn't a favorable year for price appreciation, it certainly was for dividends. In 2014 he earned a total of $4,116.29 in dividends.

In 2015 he earned $6,093.77 in dividends for a whopping 48% year over year return."

Is it correct to assume part of the 48% growth was tied to new money added to the portfolio?

Lowell]]>

"Although 2015 wasn't a favorable year for price appreciation, it certainly was for dividends. In 2014 he earned a total of $4,116.29 in dividends.

In 2015 he earned $6,093.77 in dividends for a whopping 48% year over year return."

Is it correct to assume part of the 48% growth was tied to new money added to the portfolio?

Lowell]]>

http://bit.ly/1NZRRSA

Keep in mind these are single runs and therefore somewhat suspect. A robust model will see Monte Carlo test runs.

Lowell]]>

http://bit.ly/1NZRRSA

Keep in mind these are single runs and therefore somewhat suspect. A robust model will see Monte Carlo test runs.

Lowell]]>

To give you a little more information as to what the Kipling Tranche 2.5.1 spreadsheet can do, check out this YouTube link.

http://bit.ly/1NZR8Rq

To mirror the Dual Momentum model, I simply modify or change the settings in the Main Menu.

Lowell

http://itawealth.com]]>

To give you a little more information as to what the Kipling Tranche 2.5.1 spreadsheet can do, check out this YouTube link.

http://bit.ly/1NZR8Rq

To mirror the Dual Momentum model, I simply modify or change the settings in the Main Menu.

Lowell

http://itawealth.com]]>

Last summer a team back-tested our momentum model for several months. We found that the 33-day review period worked very well with the look-back periods we found worked best. Initially, I selected 33-days for reasons other than it worked very well.

1. As mentioned above, I wanted the review to shift throughout the month so end of the month activity did not influence the results.

2. The 33-day period avoids wash sales.

3. The 33-day period avoids short-term trading fees as I use commission free ETFs almost exclusively.

The Kipling Tranche 2.5.1 spreadsheet is actually designed to handle the tranche calculations - and the latest version aids the investor in controlling portfolio risk.

Lowell ]]>

Last summer a team back-tested our momentum model for several months. We found that the 33-day review period worked very well with the look-back periods we found worked best. Initially, I selected 33-days for reasons other than it worked very well.

1. As mentioned above, I wanted the review to shift throughout the month so end of the month activity did not influence the results.

2. The 33-day period avoids wash sales.

3. The 33-day period avoids short-term trading fees as I use commission free ETFs almost exclusively.

The Kipling Tranche 2.5.1 spreadsheet is actually designed to handle the tranche calculations - and the latest version aids the investor in controlling portfolio risk.

Lowell ]]>

There is not a huge difference in the back-tests if one moves from 30 to 33 days. What is noted is that one should not rely on only one set of data as there is something called "luck-of-review-day." For this reason, most of our back-tests include review-day-noise. This means we see what happens if one reviews a day or so earlier or up to five days later than the scheduled review. These studies lead to something called the Tranche Model where the precise review day looks at security rankings at intervals after the review day.

This link provides a reference to what I am talking about, although the look back periods differ from the pure "Dual Momentum" model.

http://bit.ly/1IiqSV6

Lowell

http://itawealth.com]]>

There is not a huge difference in the back-tests if one moves from 30 to 33 days. What is noted is that one should not rely on only one set of data as there is something called "luck-of-review-day." For this reason, most of our back-tests include review-day-noise. This means we see what happens if one reviews a day or so earlier or up to five days later than the scheduled review. These studies lead to something called the Tranche Model where the precise review day looks at security rankings at intervals after the review day.

This link provides a reference to what I am talking about, although the look back periods differ from the pure "Dual Momentum" model.

http://bit.ly/1IiqSV6

Lowell

http://itawealth.com]]>

Thanks for the suggestion and index funds. I think I can make it happen.

Lowell]]>

Thanks for the suggestion and index funds. I think I can make it happen.

Lowell]]>

Here is a link to a back-test comparing the Dual Momentum or GEM model and the Kipling Tranche model. Investable index funds were used for both portfolios. There is interesting information available in the included data.

http://tinyurl.com/jtq...

Lowell]]>

Here is a link to a back-test comparing the Dual Momentum or GEM model and the Kipling Tranche model. Investable index funds were used for both portfolios. There is interesting information available in the included data.

http://tinyurl.com/jtq...

Lowell]]>