No. of Recommendations: 1
International investing has been a heated topic at bogleheads. Since it hasn't worked in the last decade or two some people see no reason to hold international funds. They also justify it by saying a lot of US companies do business overseas.
I think it is a good time to try and preserve money since things may get rocky in the next few years. There are a few too many people who are expecting returns that I think are very unlikely.


You may be right about "time to preserve money" at least that seems to becoming more likely. If the weather continues to fuel fires and rain acid it will be time to bail out.

I keep a WWL ETF screen where top 50 now has a "Geography Objective" 78% Domestic, "Asset Class" 60% Equity (the remaining 40% contains mostly Real Estate and a few Fixed Income). Holding International Asset Class would be very risky for the near future.

GD_
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No. of Recommendations: 1
International investing has been a heated topic at bogleheads. Since it hasn't worked in the last decade or two some people see no reason to hold international funds. They also justify it by saying a lot of US companies do business overseas.

I'm not a big believe if something didn't work in the last decade or so, that means it will not work in the future. While I hope I'm wrong, I just don't see the US continuing to be the best market in the next decade or two although Europe doesn't look too hot. And I definitely not a fan of investing in a country such as China.

I think it is a good time to try and preserve money since things may get rocky in the next few years. There are a few too many people who are expecting returns that I think are very unlikely.

Rich
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No. of Recommendations: 1
International investing has been a heated topic at bogleheads. Since it hasn't worked in the last decade or two some people see no reason to hold international funds. They also justify it by saying a lot of US companies do business overseas.
I think it is a good time to try and preserve money since things may get rocky in the next few years. There are a few too many people who are expecting returns that I think are very unlikely.


You may be right about "time to preserve money" at least that seems to becoming more likely. If the weather continues to fuel fires and rain acid it will be time to bail out.

I keep a WWL ETF screen where top 50 now has a "Geography Objective" 78% Domestic, "Asset Class" 60% Equity (the remaining 40% contains mostly Real Estate and a few Fixed Income). Holding International Asset Class would be very risky for the near future.

GD_
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No. of Recommendations: 2
I have held American Century's International Opportunities Fund (Investor Class) (AIOIX) for years. It's Average Annual Returns over the past ten years is 11.94&. Last year: -13.98%
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No. of Recommendations: 8
Why is it necessary to pick one or the other and stick with it?
We don't know what the future will be, and it is notoriously impossible to predict.

Let's look at the past.
US stocks vs, non-US. VTSAX and VTMGX.
https://www.portfoliovisualizer.com/backtest-portfolio?s=y&a...

Some periods one is better, some periods the other is better.
For the period 2002 to present, the CAGRs are 8.1% (US) and 5.8% (non-US).

Or we could just equal weight them. 7.0% CAGR


Or, we could switch between them based on relative momentum. CAGR 8.4%
https://www.portfoliovisualizer.com/test-market-timing-model...

Or go one step further and switch using the Dual Momentum rules. CAGR 8.9%
https://www.portfoliovisualizer.com/test-market-timing-model...

But do not look only at the CAGRs. Look also at the risk metrics...Worst Year, Maximum Drawdown, Sharpe Ratio, Sortino Ratio.
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No. of Recommendations: 2
I keep a WWL ETF screen where top 50 now has a "Geography Objective" 78% Domestic, "Asset Class" 60% Equity (the remaining 40% contains mostly Real Estate and a few Fixed Income

ETF/ WWL screen
The first Regional/International starts at rank 58 of 100

ID   Symbol                            Name                                 Geography           Class
Criteria: FATP ETF's (6o8) (6o8)
Criteria Values: @ TR(1y) Top 100 Matches Ex. CS,Fro Ex. Com,Cur
WWL Matches: as of 2019-10-20 645 624
%ETF's @ RS Top 50 = 33% 32%
1 ITB
ISHARES U.S. HOME CONSTRUCTION ETF Domestic Equity
2 SOXX ISHARES PHLX SEMICONDUCTOR ETF Domestic Equity
3 REZ ISHARES RESIDENTIAL REAL ESTATE ETF Domestic Real Estate
4 SMH VANECK VECTORS SEMICONDUCTOR ETF Domestic Equity
5 XHB SPDR S&P HOMEBUILDERS ETF Domestic Equity
6 XSD SPDR S&P SEMICONDUCTOR ETF Domestic Equity
7 XLRE REAL ESTATE SELECT SECTOR SPDR FUND Domestic Real Estate
8 FREL FIDELITY MSCI REAL ESTATE INDEX ETF Domestic Real Estate
9 ICF ISHARES COHEN & STEERS REIT ETF Domestic Real Estate
10 ICLN ISHARES GLOBAL CLEAN ENERGY ETF Global Equity
- - - - -
51 IWY ISHARES RUSSELL TOP 200 GROWTH ETF Domestic Equity
52 IYF ISHARES U.S. FINANCIALS ETF Domestic Equity
53 NFRA FLEXSHARES STOXX GLOBAL BROAD INFRASTRUCTURE INDEX FUND Global Equity
54 VONG VANGUARD RUSSELL 1000 GROWTH ETF Domestic Equity
55 MGK VANGUARD MEGA CAP GROWTH ETF Domestic Equity
56 VUG VANGUARD GROWTH ETF Domestic Equity
57 IWF ISHARES RUSSELL 1000 GROWTH ETF Domestic Equity
58 HEZU ISHARES CURRENCY HEDGED MSCI EUROZONE ETF Regional Equity
59 SCHG
SCHWAB U.S. LARGE-CAP GROWTH ETF Domestic Equity
60 ACWV ISHARES EDGE MSCI MIN VOL GLOBAL ETF Global Equity
61 LVHD LEGG MASON LOW VOLATILITY HIGH DIVIDEND ETF Domestic Equity
62 SMMV ISHARES EDGE MSCI MIN VOL USA SMALL-CAP ETF Domestic Equity
63 IGF ISHARES GLOBAL INFRASTRUCTURE ETF Global Equity
64 SCHD SCHWAB US DIVIDEND EQUITY ETF Domestic Equity
65 SDY SPDR S&P DIVIDEND ETF Domestic Equity
66 XLP CONSUMER STAPLES SELECT SECTOR SPDR FUND Domestic Equity
67 QUAL ISHARES EDGE MSCI USA QUALITY FACTOR ETF Domestic Equity
68 SUSA ISHARES MSCI USA ESG SELECT ETF Domestic Equity
69 IDLV INVESCO S&P INTERNATIONAL DEVELOPED LOW VOLATILITY ETF Developed Markets Equity
70 JHML
JOHN HANCOCK MULTI-FACTOR LARGE CAP ETF Domestic Equity
71 DBEU XTRACKERS MSCI EUROPE HEDGED EQUITY FUND Regional Equity
72 LQD
ISHARES IBOXX $ INVESTMENT GRADE CORPORATE BOND ETF Global Fixed Income
73 FSTA FIDELITY MSCI CONSUMER STAPLES INDEX ETF Domestic Equity
74 DLN WISDOMTREE US LARGECAP DIVIDEND ETF Domestic Equity
75 OUSA O'SHARES FTSE US QUALITY DIVIDEND ETF Domestic Equity
76 DWX SPDR S&P INTERNATIONAL DIVIDEND ETF International(Ex-US) Equity
77 FEZ SPDR EURO STOXX 50 ETF Regional Equity
78 VDC
VANGUARD CONSUMER STAPLES ETF Domestic Equity
79 HEFA ISHARES CURRENCY HEDGED MSCI EAFE ETF International(Ex-US) Equity
80 DBEF XTRACKERS MSCI EAFE CURRENCY-HEDGED EQUITY FUND International(Ex-US) Equity
81 EFG ISHARES MSCI EAFE GROWTH ETF International(Ex-US) Equity
82 BAB
INVESCO TAXABLE MUNICIPAL BOND ETF Domestic Fixed Income
83 IQLT ISHARES EDGE MSCI INTL QUALITY FACTOR ETF International(Ex-US) Equity
84 KXI
ISHARES GLOBAL CONSUMER STAPLES ETF Global Equity
85 PFXF VANECK VECTORS PREFERRED SECURITIES EX FINANCIALS ETF Domestic Hybrid
86 IGIB ISHARES INTERMEDIATE-TERM CORPORATE BOND ETF Global Fixed Income
87 CORP PIMCO INVESTMENT GRADE CORPORATE BOND INDEX FUND Global Fixed Income
88 USIG ISHARES BROAD USD INVESTMENT GRADE CORPORATE BOND ETF Global Fixed Income
89 VCIT VANGUARD INTERMEDIATE-TERM CORPORATE BOND ETF Global Fixed Income
90 FDL FIRST TRUST MORNINGSTAR DIVIDEND LEADERS Domestic Equity
91 PSK SPDR WELLS FARGO PREFERRED STOCK ETF Global Hybrid
92 IBDR ISHARES IBONDS DEC 2026 TERM CORPORATE ETF Global Fixed Income
93 EFAV ISHARES EDGE MSCI MIN VOL EAFE ETF International(Ex-US) Equity
94 QLTA
ISHARES AAA - A RATED CORPORATE BOND ETF Global Fixed Income
95 MLN VANECK VECTORS AMT-FREE LONG MUNICIPAL INDEX ETF Domestic Fixed Income
96 IBDQ ISHARES IBONDS DEC 2025 CORPORATE ETF Global Fixed Income
97 BSCP INVESCO BULLETSHARES 2025 CORPORATE BOND ETF Global Fixed Income
98 PZA INVESCO NATIONAL AMT-FREE MUNICIPAL BOND ETF Domestic Fixed Income
99 IAGG ISHARES CORE INTERNATIONAL AGGREGATE BOND ETF International(Ex-US) Fixed Income
100 BSCO
INVESCO BULLETSHARES 2024 CORPORATE BOND ETF Global Fixed Income


GD_
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Ray, I tried your dual momentum test portfolio from 2009 on, starting each year, 2009,2010,...
If you started in 2014 the DM strategy was a bit better, but other years the draw downs, sharpes, etc., were so
similar and the equal weight CAGR was larger, that I fail to see any advantage of DM over buying and holding. I suppose PV rebalances buy and hold
once a year, but I didn't try to verify that.

Any thoughts about the DM method and why it seems to have caught on with a few MI Fools?

rrjjgg
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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.

https://bit.ly/2Bs1o7T

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

https://bit.ly/2W276XB

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.

Baltassar
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I have held American Century's International Opportunities Fund (Investor Class) (AIOIX) for years. It's Average Annual Returns over the past ten years is 11.94&. Last year: -13.98%


Just out of curiosity I did a quick compare for 10 years. Numbers may not be exact.
AIOIX: 78.7%
SP500:174.4%

Why some have been jump ship on international stocks. Not saying I would but it has been a concern for a while now.



Rich
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No. of Recommendations: 1
Interesting that your WWL ETF list has 5 real estate ETF in the top 10. While doing my quarterly 401K rebalance, the top mutual fund choice was a real estate fund that has never been a top pick. It was such a strange pick that I actually ran the numbers manually and did more due diligence than usual and sure enough its the top fund available to me and is now part of my 401K holdings. FWIW that Real Estate fund is up 30% YTD and still yields 3.5% dividend. Hoping that momentum continues for the next quarter.

Peace,
Opihi
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No. of Recommendations: 3
Any thoughts about the DM method and why it seems to have caught on with a few MI Fools?

I'm not Ray but in my opinion. Members of this board myself included typically have a math/science background,
we all fall in love with the next backtest which purports to show us a simple way to outperform all our pears.
We especially love simplicity and Antonacc's dual momentum published in October 2014 was simple, based on
seemingly solid logic filled the bill. Unfortunately post discovery hasn't been kind to his dual momentum for the
last 5 years post discovery. In fact over the last 3 3/4 years it has only had a 3.5% CAGR vs a 6.7% for a 60/40
Five years isn't enough time to truly torpedo this strategy yet especially since very few TAA strategies almost all
developed in the wake of the 2008 drawdown have done well in the last 4 or 5 years.

Over the last 3.75 years of 40 TAA strategies AllocateSmartly tracks only 6 beat the 60/40 benchmark.
Of those 6 only 4 have also done well for the last 20 years, Growth Trend Timing, 2 versions of Protective Asset
Allocation and Generalized Protective Momentum. Naturally the method I'm using isn't one of those.

RAM
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No. of Recommendations: 3
Antonuchci published his paper "Risk Premia Harvesting Through Dual Momentum on 4/18/2012 using data thru
December 2011 so to be fair post discovery results should be from January 2012. From his website using his original
funds:
2012	13.33	1.1333	
2013 17.78 1.1778
2014 6.68 1.0668
2015 -0.51 0.9949
2016 7.91 1.0791
2017 18.25 1.1825
2018 -6.06 0.9394
2019 1.09 1.0109 9mo
Total 1.717


Which gives a CAGR of 7.2% in a period where SPY had a CAGR of 13.76%

RAM
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No. of Recommendations: 11
re: Baltassar's timing portfolio link

I have played with the out-of-market asset in backtests for several years. Invariably a medium- or long-term bond fund significantly improves the CAGR.
However....I do not trust this going forward. At the point we are with interest rates, bond returns are much lower than historically *and* there is a huge interest rate risk.

Also, it seems to be a bit of data-dredging. It also mucks up the picture, masking what is going on with the switching between the two equit assets.

I decided that my goal in backtesting was to find a bear market asset that was safe, rather than attempting to make a profit from the bear, and not to find a backtest variant that reported a high CAGR. And nothing is safer than cash. There's nothing wrong with hiding in a cave during a storm, you don't need to be out collecting downed trees.
The only thing I would consider for the out of market asset is short term (1-3 year) treasuries.


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,

Every timing backtest I've done (mostly in Excel) has show a definite improvement with the FRED indicators.


If you started in 2014 the DM strategy was a bit better, but other years the draw downs, sharpes, etc., were so similar and the equal weight CAGR was larger, that I fail to see any advantage of DM over buying and holding.

The problem is that we have recency bias. For the last 10 years or so, EVERY strategy and screen has underperformed a simple buy-and-hold of the S&P500. But 10 years is not a long enough period of time to have confidence in a strategy. Even 20 years is probably not long enough.

Where all timing strategies have their success is in the bear markets. Primarily in the bid bad bear markets. In a period without a bear, they will necessarily not outperform B&H, and will probably underperform.

You can clearly see that in Baltassar's backtest. It underperformed until the 2001 bear market but after that is was always way ahead. It did not get badly hurt in either the 2001 or the 2008busts.

Now change the starting year to 2003. Again, the timing portfolio wasn't any better than B&H until the 2008 bear.

But now change the start to 2009. In a period which had no bear markets, B&H soundly beats the timing portfolio.

So when you "tried dual momentum test portfolio from 2009 on, starting each year, 2009,2010...", you were not discovering anything except that B&H has worked better in a long bull market. You need to run the test backwards, to 2008, 2007, 2006... to see anything meaningful.

Any thoughts about the DM method and why it seems to have caught on with a few MI Fools?

Because it is simple and makes logical sense, and over the long run shows excellent results. We don't believe that the bull market will last forever.

It's frustrating in a way. I am looking forward to a bear market so that my timing strategy will work and work good. But I also hope that the bear market never comes. Napoleon and Hitler both hoped that the Russian winter would never come, too. But we timing folks have a plan in place for when it does.
Insurance always looks like a waste...until you need it.
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No. of Recommendations: 2
Read a few of the GTAA research / backtests and papers by Faber, Antonacci, et al. It's great diversification to plan an allocation to international stocks, both large caps and small caps, and to international real estate. The allocations can be based on relative momentum, or just absolute momentum against their 10 month moving averages.

Such a portfolio backtests extremely well for volatility reduction with total return approaching large caps - for long backtest periods.

Unfortunately, the S&P 500 specifically (US large caps) has beaten everything for almost every time period for the last 11 years. The big money and the 401K money goes to the safest bets, and it has flowed to the S&P 500 index.
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At the point we are with interest rates, bond returns are much lower than historically *and* there is a huge interest rate risk.

I have given this a lot of thought, as you have, and I have concluded that the end of the long bond bull does matter as much for a traded portfolio as it does for an LTBH portfolio, in which you are holding bonds for year-in/year-out moderation of volatility. In that context the general state of interest rates at present is indeed not very promising.

In the context of a traded portfolio my (limited) experience, and also my inference from scrutinizing backtests and so on, is that, in periods when all equities are doing so poorly that bonds actually out-perform over an intermediate term, bonds are likely to pose a reasonable risk proposition during the period in which you will hold them, which is almost by definition going to be one when equities are doing poorly. When money is looking for somewhere safer to go, intermediate US treasuries are not (yet) out of style. The Vanguard Fund I used in the model port I put up includes US investment-grade corporates as well, but the difference is de minimus, and it allows a longer back-test.

I agree that one has to be skeptical of any system in which a significant share of returns comes from bonds. But I also think that, as a trade, rather than as a buy-and-hold asset, bonds still have a place, and can be expected to pay their way better than cash.

My $02.

Baltassar
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Correction:

My first sentence in the previous post should read: ... I have concluded that the end of the long bond bull does NOT matter as much for a traded portfolio as it does for an LTBH portfolio...

And yeah, I did proof-read the thing. Oh well.

Baltassar
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[Weekly Market Outlook] Sea Change Underway led by Small Caps, Value, and Foreign Equities

October 20th, 2019
Keith Schneider
CEO, MarketGauge.com


This week’s highlights are:
• US Equity Market remains in a wide trading range
Risk Gauges are still in full risk-on mode
• Volume patterns improved with small caps leading (IWM or Grandpa Russell)
• Market Internals remain positive while working off running rich short term
• Semi’s looks toppy with a momentum divergence in place at recent highs
• Small Caps (IWM) improved which if holds could mean the tariff war is at least on pause
• Value stocks after a decade long slumber are looking ready to rally hard
Foreign Equities are gaining verses the US
• The dollar broke down under some key moving averages
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No. of Recommendations: 2
A link to PV for something called Accelerated Dual Momentum.
Switch between SP500 and international small caps when positive momentum. VUSTX - long term treasury bonds when out of equities.
https://tinyurl.com/y5e6ncts

I somewhat share Rayvt's concerns about all of the backtest models using long duration bonds as the alternatives to equities. The historic noncorrelation may be a thing of the past if the real repricing arrives. It now seems unbelievable that long term bonds were once yielding 13%. Also seemingly unbelievable is that people will purchase 10 yr Euroland Greek debt at negative yields.

The Antonacci GEM trend following model has had a string of disappointing years. Zerohedge has had articles over the last six months or so with estimates of capital allocated to trend following. Quite large numbers that must have some market influence. It certainly is an easy model to follow. Antonacci put out a research update last October that somewhat defended the 12 month lookback period by extending his historical data much farther into the past. Link: https://dualmomentum.net/2018/10/16/extended-backtest-of-glo...

One interesting timing signal presented on this board is the tpoto model he incorporated into several of his stock screens. Out of the screen if the $SPX has not returned greater than negative 1.5% over the last three months. That sure seemed to bring improved returns.
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