Fair Weather Investing*

Process:

Fair Weather Investing, as applied to our actively managed portfolios, aims to keep the investor holding a security only as long as it maintains an upward price trend. When the security is no longer able to maintain upward momentum, the security is sold and the proceeds moved to a cash or cash equivalent holding until such time as momentum returns.

Research:

Mebane Faber, in a 2009 whitepaper, back-tested a long term moving average strategy on a hypothetical portfolio of equal weight bonds, US stocks, International stocks, REITs and commodities. Faber found that between 1973 and 2008, the portfolio would have made a profit in every year but one and returned 11.3% before taxes and commissions. Buying and holding the same portfolio would have returned only 9.8%, whilst showing losses in six of those years.

Thomas Kilgallen's whitepaper, Testing the Simple Moving Average across Commodities, Global Stock Indices, and Currencies, illustrated how applying a "simple moving average strategy" to certain securities over a period of several decades provided before-tax risk adjusted returns superior to a Buy and Hold strategy.

 

*This information applies to the firm's actively managed portfolios only.

Past performance is no indicator of future return. There is no guarantee that applying a momentum strategy will either increase your portfolio’s return or lower its volatility as compared to any other strategy. Some securities and market environments are particularly unsuitable for trading using a momentum strategy. Active investing strategies will likely incur higher commissions than a buy and hold strategy and may or may not increase your taxes relative to buying and holding.