Five Momentum Investment Models

As mentioned in a previous post, I have created several momentum investment models. Five, in fact. One for each of my investment accounts. (You may want to start at the previous post to get some perspective before venturing on here.) Some of my accounts are large and some are small. And each investment account has its purpose. I’ve already introduced you to PUSH THE BUTTON MAX in a previous post, so let me introduce you to the other four, each of which has its own personality.

BLASTER

BLASTER is the most aggressive of my models. It might be more appropriate for a smaller account, or for a young, aggressive investor. From 2007 thru May 17, 2021, BLASTER had an average annual return of 19.2%, vs. the S&P 500 return (as represented by the ETF SPY) of 9.9%. The maximum drawdown was -19.6% vs. -55.2% for SPY. Here are the particulars of the backtest, as reported by ETFReplay.com.

BLASTER – Risk and Returns

BLASTER definitely has a unique personality. When the model is bullish, it invests in just one ETF from a portfolio of 25 rather aggressive ETFs (see below). The heart of this portfolio is technology, with a broad mix of additional ETFs in green energy, oil & gas exploration, home construction, financial services, etc. I love BLASTER for its aggressiveness. Even though I’m an old guy, I really like having some small part of my assets in these very aggressive ETFs.

BLASTER – Portfolio

So how did BLASTER perform each year? Following is the ETFReplay.com backtest annual results.

BLASTER – Annual Returns

SMOOTH

SMOOTH is a big contrast from BLASTER. SMOOTH gives a much more gentle ride. Notice below, the worst period (monthly) loss from 2007 thru May 17, 2021 was only -6.58%. SMOOTH gives up the aggressive upside potential that you get with BLASTER for a much gentler ride. I use smooth for one of my larger accounts. It helps me sleep well at night.

SMOOTH – Risk & Returns

SMOOTH enjoys a quiet ride because, when the model is bullish, it invests in three ETFs (vs. one for BLASTER) and its core is centered on dividend-paying ETFs (see below). The cashflow produced by these dividend-paying ETFs tends to smooth out the volatility. In addition to dividend-paying ETFs, the model can choose from ETFs that focus on various company sizes and growth prospects. And finally, there is the option to select ETFs focused on companies in foreign countries.

SMOOTH – Portfolio

So what do the annual returns of SMOOTH look like? Let’s look below.

SMOOTH – Annual Returns

ROBUST

Introducing ROBUST, the big daddy. I use ROBUST for my largest account. ROBUST backtests an average annual return of 16.3% from 2007 through May 17, 2021, with a drawdown of only -13.9% during that period (see below).

ROBUST – Risk & Returns

ROBUST takes a bit more work to manage since it chooses the six strongest ETFs from the portfolio each month. That means on the first trading day of the month I might have to close six positions and open six more. But I love ROBUST. It has very large shoulders and long arms to wrap itself around the entire marketplace. What do I mean? Well, the portfolio is not concentrated on any aspect of the market like the other portfolios (e.g., Technology for BLASTER and Dividends for SMOOTH). ROBUST can choose from the six strongest sectors of the economy — a very broad set of options (see below).

ROBUST – Portfolio

ROBUST has given a strong performance in the backtest as seen below.

ROBUST – Annual Returns

SLICK

SLICK (Don’t you love these names?) is the final model, which I use for a small account. The average annual growth rate for SLICK (from 2007 through May 17, 2021) was 16.9% with a maximum drawdown of -15.6%, according to ETFReplay.com. Like BLASTER, SLICK chooses just one ETF each month. That kind of concentration can result in big up months (best period of +18.52) and down months (worst period of -10.10%). Imagine seeing your account go down over 10% in a month. That’s why I use it on one of my small accounts.

SLICK – Risk & Returns

For small accounts, being able to simply trade in and out of one ETF each month make life easy-peasy. SLICK chooses from ETFs that tend to take their turn at accelerating in bull markets (see below). SLICK selects from ETFs that are very similar to PUSH THE BUTTON MAX, but takes it a step further in aggressiveness by limiting the choice to just one ETF.

SLICK – Portfolio

And the results look pretty good on an annual return basis, as shown below.

SLICK – Annual Returns

Summary

So there you have it. Five momentum investment models, each with a unique personality. I’m not recommending these models. I’m just telling you what I’m using right now for our investment accounts. More than likely, I may be on to some other system or methodology in a few weeks, months or years. But for today I’m really enjoying these models. There is peace of mind knowing how they behaved since 2007. I hope these models give you some new ideas for your investments.

May the returns be ever in your favor! — Clay

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