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Pure Momentum ETF Strategy Performance for August, 2016

My ETF momentum strategy declined 1.33% in August leaving it in a virtual tie for performance with the benchmark I am using, Cambria Global Momentum (GMOM).

Pure Momentum ETF Strategy


Pure Momentum Performance Update

At the end of January, I made changes to my Pure Momentum strategy to reduce volatility. As such, I thought it would be appropriate to wait for six months to pass before posting a performance update of my ETF momentum strategy.

For comparison purposes, I show the monthly performance of Pure Momentum (as reported by Collective2.com) along with Cambria Global Momentum ETF and Resolve Asset Management’s Adaptive Asset Allocation Fund.

The following is from Cambria’s site:

The Cambria Global Momentum ETF (the “Fund”) seeks to preserve and grow capital from investments in the U.S. and foreign equity, fixed income, commodity and currency markets, independent of market direction. The Fund intends to target investing in the top 33% of a target universe of approximately 50 ETFs based on measures of trailing momentum and trend. The portfolio begins with a universe of assets consisting of domestic and foreign stocks, bonds, real estate, commodities and currencies.

And the following is from Resolve’s site:

The Fund applies the principles of Adaptive Asset Allocation (AAA) and takes advantage of institutional-grade execution and margin rates to run our most dynamic version of AAA. The Fund trades more regularly to aggressively capitalize on material changes in trends, correlations, and asset risks. In addition, the Portfolio targets a specified level of Portfolio risk, so overall Portfolio exposure will expand and contract in response to observed changes in Portfolio volatility, subject to leverage constraints. The Fund is constrained to long positions only, and the Canadian dollar is managed vis-a-vis the U.S. dollar by utilizing an active dynamic hedge.

Pure Momentum ETF Strategy

The standard deviation of monthly returns for the Resolve, Cambria and Pure Momentum are 2.19%, 1.27% and 1.66%.

Six months is really a meaningless timeframe over which to compare performances but it is all I have. With that in mind, my strategy is doing well with respect to professionally managed funds.


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Why I Haven’t Posted Much Lately

Early this year, I was asked to join a new band as the acoustic guitarist. Over the past six months we have recorded an album with fourteen original songs. We aren’t full-time musicians so the recording was done as all five members could find time. The album, Sweet Little Thing by Somebody Famous, has just been made available on Spotify and our first gig is at The Gathering in Burlington next month.

I’d love to hear your feedback on the album. If you don’t have a Spotify account you can sign up for a free one.

Somebody Famous


Performance of Pure Momentum Models YTD

January wasn’t kind to investors and my momentum models both suffered setbacks that month. That said, both Pure Momentum (ETF model) and Pure Momentum II (US stock model) both rebounded in February and March. The strategies are down 2.7% and 3.7% respectively year-to-date.



Pure Momentum IIPure Momentum can be followed on Collective2 here and Pure Momentum II can be followed here.


Short Term Performance Results Will Vary

I have become less active here lately as I was invited to join a project that has nothing to with investing but is very interesting from a personal point of view. Another reason for my lack of frequent posts can be understood from an excellent post by Larry Swedroe at ETF.com.

The post discusses how stock investing strategies which have stood the test of time for many decades will have periods of underperformance. We can expect the duration of underperformance to last as much as ten years. This expectation of underperformance is fundamental to understanding why it is so difficult for us investors to stick with a proven strategy – we hate underperformance and are likely to change strategies when a given strategy underperforms for as little as one year never mind ten years.

With January being such a terrible month for most investors, including me, I went on a financial media diet. I intentionally abstained from watching or reading financial media as much as possible. While the markets tossed and turned, I sat on my hands and not once checked on the performance of my strategies. I wanted to see if I could do that for a month as I hadn’t done it before and it wasn’t difficult at all.

I strongly encourage you to read Swedroe’s article. It is one that I plan to read at least annually.