How to implement a dual momentum system of absolute and relative momentum. Systemise your investment process and enjoy superior returns
The aim is to construct a portfolio of assets with strong price performance that can outperform a global tracker / S&P500.
Momentum investing typically involves a 6 to 12 month measurement period to find the best performers, in this case exchange traded funds, ETFs. It then anticipates a further 3 to 6 months of strong price performance with the possibility of outliers that can carry on for longer time periods.
In its simplest format momentum investing would choose between stocks and bonds or between US equities and emerging markets equities. However in recent times the correlation between these asset classes has changed such that they can be under pressure at the same time.
By combining absolute and relative momentum I can see that although an ETF might be declining in price, if its relative strength is holding up then I know that this is due to market factors rather than a weakness in the ETF itself and I can stay in the trade for longer.
I use my dashboard file to find the best ETFs by county, sector, theme and factor. [ Ссылка ]
I then use my relative strength file to discover how these ETFs rank amongst a universe of over 1000 other ETFs. [ Ссылка ]
This is then combined into a dual momentum google sheet and I use look at the correlation between the selections and the sharpe ratio of the selections in another google sheet. The files mentioned in the video are available here [ Ссылка ]
Guide to my channel
I use google sheets a lot. For all the free files I have shared, have a look at this playlist
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I'm keen on helping people to achieve financial independence. For videos on this topic go here
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Exchange Traded Funds are a great way to invest cheaply and effectively.
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Investment Trusts can offer exposure to exciting opportunities
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The best funds I have come across have a playlist here
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#momentuminvesting #dualmomentum #ETFs
Chapters
00:00 Introduction - aim of the dual momentum system
00:55 What is momentum investing?
01:47 Definitions of momentum, relative strength, trend, mean reversion, sharpe ratio
02:26 Pitfalls of momentum investing
04:07 A momentum system in action
05:00 Funds vs individual companies
05:28 Dual momentum strategy explained
07:02 Google sheets portfolio correlations & sharpe ratio, dual momentum system
09:02 Conclusion
