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A Quarterly Updated Portfolio Of Fidelity Select Funds Based On Dual Momentum


A portfolio of ten Fidelity select funds updated every quarter on the basis of dual momentum yields excellent performance.

In this final follow up to a post (  ) which suggested that a specific set of parameters for the dual momentum strategy to a large class of funds yields very good performance, we describe the results of applying the strategy to a set of ten Fidelity Select funds ( FSPCX, FSUTX, FDFAX, FSENX, FDLSX, FSCHX, FSDAX, FSCSX, FSPHX, FSRPX ) . This basket represents all of the S&P sectors (except the recently introduced Real Estate), and, therefore,  suffers minimally from selection bias (since Fidelity has multiple funds for each sector, there is admittedly a subjective element in choosing these specific funds).

The method is quite straightforward, and requires very little computations. The portfolio consists of ten or less funds selected at each quarter in the following manner:

  • At the beginning of each quarter, calculate the total return of each fund, and of FAGIX and LAGVX (a high yield fund and a corporate bond fund), during the immediately preceding calendar month.
  • For each fund, compare its return with that of FAGIX and LAGVX, chose one of the three which has the highest return during the prior month. If the return of the fund thus selected is a loss,  replace it by TLT (or VUSTX for years preceding the inception of TLT).
  • Thus there are ten assets, each of them being one of the funds,  or FAGIX or LAGVX or TLT/VUSTX.
  • Invest equal amounts in the ten assets thus selected.

Thus, at the beginning of every quarter, the amount invested in any of the funds is either zero or ten percent of the portfolio, and the investment in TLT/VUSTX or FAGIX or LAGVX may range from zero to hundred percent of the portfolio.

The following table summarizes the results for the period 1987-2017.

Annualized Volatility (%)
Max DD (%)
Sharpe Ratio
Sortino Ratio
One factor Beta
Number of Years of Losses


2001: -1%,

2002: -3.1%

The equity curve, the rolling buy and hold returns, ten year rolling returns, and the allocation diagram are shown in the figures below.

For Q3 2017, the allocations are 70% for LAGVX, and 10% for each of the following funds: FSPHX, FSCHX, FSPCX (Health, Materials, and Finance).

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in LAGVX FSPCX FSPHX FSCHX over the next 72 hours.