It is now a month since I closed my last stock position, due to my performance test on global stock index.
It remains to be seen whether this was a wise move or not this time. But historically it has increased performance and, more importantly, reduced volatility by reducing the drawdowns.
I have earlier mentioned that I have accounts at Avanza and Degiro. Foreign currency investments are done at Degiro, while the Avanza investment are mainly done in SEK. The split-up has emerged over time and cannot for tax and legal reasons easily be changed. Cost wise Degiro is cheaper, especially when it comes to foreign currency investments.
Until now the performance test has been done in USD. The majority of backtests of dual momentum has been done based on USD and USD based test has been specifically recommended here, but the figures presented shows that carrying out the the test in local currency is still a successful strategy. For SEK based backtests see here and here (swedish).
All in all it works quite well regardless of the currency used for the performance test. I have therefore decided use a SEK based test in the Avanza accounts and continue with USD based test in the Degiro accounts. This way the characteristic wip-saw losses will be lower and the volatility as well, at least this is my expectation. And the strategy execution will be even easier, meaning less risk for mistakes.
Since 2015, I have successfully run SE/Global Dual Momentum portfolios for my children, therefore I will assign a part of the momentum portfolio to SE/Global Dual Momentum, using mutual fonds.
Another tweak I will introduce, is to replace the global index test with the test that when any region is above the safe rate and max of global/US index, I will switch into stock. This will slightly increase the likelihood of staying in stock compared to other asset classes, but according to backtests the difference is almost negligible.
As I am planning to re-organise the strategy document at year end, I will not update the current document with these changes. Nevertheless they are in effect as of now.
It remains to be seen whether this was a wise move or not this time. But historically it has increased performance and, more importantly, reduced volatility by reducing the drawdowns.
I have earlier mentioned that I have accounts at Avanza and Degiro. Foreign currency investments are done at Degiro, while the Avanza investment are mainly done in SEK. The split-up has emerged over time and cannot for tax and legal reasons easily be changed. Cost wise Degiro is cheaper, especially when it comes to foreign currency investments.
Until now the performance test has been done in USD. The majority of backtests of dual momentum has been done based on USD and USD based test has been specifically recommended here, but the figures presented shows that carrying out the the test in local currency is still a successful strategy. For SEK based backtests see here and here (swedish).
All in all it works quite well regardless of the currency used for the performance test. I have therefore decided use a SEK based test in the Avanza accounts and continue with USD based test in the Degiro accounts. This way the characteristic wip-saw losses will be lower and the volatility as well, at least this is my expectation. And the strategy execution will be even easier, meaning less risk for mistakes.
Since 2015, I have successfully run SE/Global Dual Momentum portfolios for my children, therefore I will assign a part of the momentum portfolio to SE/Global Dual Momentum, using mutual fonds.
Another tweak I will introduce, is to replace the global index test with the test that when any region is above the safe rate and max of global/US index, I will switch into stock. This will slightly increase the likelihood of staying in stock compared to other asset classes, but according to backtests the difference is almost negligible.
As I am planning to re-organise the strategy document at year end, I will not update the current document with these changes. Nevertheless they are in effect as of now.
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