Dual Momentum, as advocated by Gary Antonacci, is currently recommending 100% of the portfolio be invested in VTI, Vanguard's Total Market ETF. The basic Dual Momentum model follows a few simple guidelines, outlined in this article.
Main Menu Assumptions: Adapting a spreadsheet designed to accommodate many more securities, the Main Menu worksheet shown below is set to look back one year or 252 trading days. A weight of 100% is assigned to ROC1, the single look-back period. Since this model recommends investing in only one ETF at a time, the maximum number of assets is set to one.
Dual Momentum Recommendations: Based on the above assumptions, if VTI is performing above SHY, our cutoff ETF, we invest 100% of the portfolio in VTI. This is currently the recommendation. If VEU is the top performing, and still performing above SHY, we invest 100% of the portfolio in VEU. Should neither perform above SHY, we invest 100% in bonds or in this case, AGG.
The portfolio is reviewed every month. My preference is to review every 33 days so as to move the review day throughout the month.
Risk Reduction Worksheet: The following worksheet is a new addition to this spreadsheet and it provides the investor with information as to what percentage of the portfolio is at risk until the next review day. Using a 5% Trailing Stop Loss Order for VTI, the portfolio with 900 shares invested in VTI currently carries a 4.9% risk. This is nearly $5,000 of a $100,000 portfolio. If this risk is too high, lower the TSLO percentage to a value that is acceptable.
We do nothing until the next review day or 33 days from today.
Disclosure: I am/we are long VTI.