No. of Recommendations: 5
Any thoughts about the DM method and why it seems to have caught on with a few MI Fools?

I do not use DM per se, but the method I do use for traded accounts (IRAs) works on similar principles: a short list of broad-gauge funds traded on the basis of intermediate-term look-backs. I have found this approach to work very well.

Here is a DM portfolio comprised of two equity funds (total US and total ex-US), plus an intermediate bond fund as the "out of market" asset. Look-back is 10 months, to echo what is done with the GTAA port. I personally would use a five-month look-back, which echos Mungofitch's 99-day rule for judging when market mojo is fading.

Here are the same two equity funds, but with cash in lieu of bonds; again, 10 month look-back.

As to why this sort of thing would be appealing to MI types, I think the answer is some combination of:

1. It is mechanical, low-cost, and low-maintenance (36 trades in 21 years)
2. It offers good risk-adjusted returns, including good protection against major bears.
3. It is unlikely to be over-engineered.

Those would be my reasons, anyway. My reservation, which is a modest one, is that I do not know how to test it using GTR1, whose daily results would be valuable confirmation (or disconfirmation). That would be the final step for me. If anyone does know how to do this, I expect many would be grateful if the knowledge were shared.

I should add that I think this method could be combined easily enough with the FRED recession indicators. I do not know whether the results would be better, but it might generate more long-term gains, thus making it more suitable for a taxed account. It would also avoid false moves in an extended bull market, as many have experienced these last ten years.

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