Momentum Butterfly portfolio

[ochotona]

If you use every available fund from your broker, you are at risk of buying into small funds, maybe lightly traded, with poor liquidity where it's difficult to sell in case of emergency, or the bid/ask spread is high, or the fees are high. The list I presented isn't as exciting as the brightest stars in the fund universe, but they have been screened for overall quality. The more a fund resembles individual stocks instead of sectors, the worse momentum works, so I have read.

[koekebakker]

I am really uncomfortable holding gold and long bonds in another currency.

As far as I know gold is gold, doesn't matter what currency the etf uses. The returns are the same when converted to your own currency. Holding IAU doesn't expose you to any currency risk.

I agree with the others, stick with something simple, like a desert portfolio with swedish fixed income and global stocks. Keep a small play money account on the side.

[mukramesh]

I am really uncomfortable holding gold and long bonds in another currency.

As far as I know gold is gold, doesn't matter what currency the etf uses. The returns are the same when converted to your own currency. Holding IAU doesn't expose you to any currency risk.

I agree with the others, stick with something simple, like a desert portfolio with swedish fixed income and global stocks. Keep a small play money account on the side.

This honestly might be the best you can do in your situation, and it's really not bad at all. I am not sure why your number one option is the Permanent Portfolio but because you cannot do it perfectly, your alternative is a momentum based active strategy. Have you considered creating your own static asset allocation with the 'spirit' of the PP (stocks, bonds, gold, cash)?

[lordmetroid]

I am really uncomfortable holding gold and long bonds in another currency.

As far as I know gold is gold, doesn't matter what currency the etf uses. The returns are the same when converted to your own currency. Holding IAU doesn't expose you to any currency risk.

I agree with the others, stick with something simple, like a desert portfolio with swedish fixed income and global stocks. Keep a small play money account on the side.

This honestly might be the best you can do in your situation, and it's really not bad at all. I am not sure why your number one option is the Permanent Portfolio but because you cannot do it perfectly, your alternative is a momentum based active strategy. Have you considered creating your own static asset allocation with the 'spirit' of the PP (stocks, bonds, gold, cash)?

I am compiling data for backtesting a pure Dual momentum investment-strategy right now. Sure the ride may be more bumpy than the steady ride of a Permanent Portfolio but I can not be allowed to be discouraged by a bumpy road.

[mukramesh]

The main draw of the PP is it's incredibly low volatility. This psychological benefit helps us stick with it (not change strategies) when it under-performs because we know it provides safety under different economic conditions.

You've already switched portfolios multiple times so I am wondering if you will have the same problem again when your momentum portfolio begins to under-perform. The 'bumpy' ride is actually a huge risk because it will cause you to sell low when you start believing your strategy is not working.

[ochotona]

Lord you completely misunderstand Dual Momentum. That is all I have to say. The absolute momentum makes it loss limited and low volatilty

[mukramesh]

Under-performance can be either due to larger than average losses or lower than average gains. Using absolute momentum could give rise to a situation where lordmetroid is out of an asset that is gaining due to not hitting a certain trigger, correct?

Investing is totally personal and while you might be okay with using an active strategy or other PP tweaks, based on lordmetroid's post history, I have doubts that he would be able to stick with such a strategy long term - and he even sorta agreed in his reply to my first post in this topic.

[ochotona]

I am compiling data for backtesting a pure Dual momentum investment-strategy right now. Sure the ride may be more bumpy than the steady ride of a Permanent Portfolio but I can not be allowed to be discouraged by a bumpy road.

HERE IS YOUR BACKTEST, MERRY CHRISTMAS!

[MachineGhost]

I can't really do a Permanent Portfolio though. The longest bonds in Sweden is a mere 10 years, Gold is always bought in USD on the world market, though I found an ETF that buys Gold using JPY (ticker symbol GYEN) and I can't stop fiddling with my investments so I need to find something that is suitable to my personality.

Yes you can.  Just adjust the bond allocation upwards so the volatility matches the stocks and gold.

[MachineGhost]

Lord you completely misunderstand Dual Momentum. That is all I have to say. The absolute momentum makes it loss limited and low volatilty

The price you pay is whipsawing up to 9 times in a row.

[ochotona]

I think I have found a way to get rid of some whipsaws. Often the buy/sell emerges due to an anomaly at the beginning of the look-back period... maybe the security hit an air pocket a year ago, 6 months ago, whatever.

I am going to smooth through the time series. But my smoother will be double-sided... it will use values in the future and past relative to the past date. It's not predictive... it's purely descriptive.

[ochotona]

If you don't do a smoothing operation on the time period prior reference date, you're going to get the crap beat out of you when we start doing year-ago compares between late August 2015 and 2016 ! Your buy-sell signals will go NUTS.

If I do a linear fit on +/- two months from the reference date, I get reasonable de-noised results.