Summary
This strategy is still in prototype stage. We reserve the right to make changes without prior notice.
- Objective: aggressive growth
- Type: momentum strategy
- Invests in: ETFs tracking S&P industry secvtors
- Rebalancing schedule: daily
- Taxation: 90% short-term capital gains
- Minimum account size: $3,000
TuringTrader’s Hokey Pokey aims to track S&P-500 bull runs, while avoiding much of the asset’s downside. The strategy achieves its objective through a combination of momentum and trend-following techniques, paired with a managed bond strategy as a risk-off investment. The strategy appeals to investors seeking aggressive growth, either as a standalone investment, or as a component of a meta portfolio.
Performance
This table shows the portfolio’s key performance metrics over the course of the simulation:
The following chart shows the portfolio’s historical performance and drawdowns, compared to their benchmark, throughout the simulation:
This chart shows the portfolio’s annual returns:
The following charts show the Monte-Carlo simulation of returns and drawdowns, the portfolios 12-months rolling returns, and how the portfolio is tracking to its benchmark:
Asset Allocation
The portfolio last required rebalancing after the exchanges closed on @last-rebal@. Due to fluctuations in asset prices, the exact allocations vary daily, even when no rebalancing occurred. The current asset allocation is as follows:
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Strategy Rules
The operation of Hokey Pokey can be summarized as follows:
- Identify periods of healthy market momentum
- invest in the top-ranked asset from a universe of ETFs tracking S&P-500 industry sectors
- Otherwise, identify periods of healthy broad market trend
- invest in an ETF tracking the S&P 500
- Invest any idle capital in TuringTrader’s Buoy strategy
The strategy is an expansion on typical momentum strategies, and falls back to investing in the broad market, when it determines that ranking assets by momentum does not offer any upside.
Diversification
Hokey Pokey typically invests either in a stock market ETF, potentially focused on a single industry sector. As a consequence, there is no direct diversification, and, in the short term, the strategy follows the traded assets. However, the strategy’s tactical aspect accomplishes some limited serial diversification, effectively reducing market correlation.
The Monte-Carlo simulation shows how the strategy significantly decouples portfolio returns from the underlying assets and achieves an impressive risk reduction.
Returns & Volatility
While the strategy determines healthy momentum, it has the potential to outperform the market by investing in a single industry sector. In times where momentum collapses, Hokey Pokey tracks the broad market, following a ‘win more by losing less’ philosophy. During bearish times, it invests in managed bonds, avoiding the deep downturns associated with stock market investments. In combination, the strategy has outperformed the market, even though there may be multi-year periods of on-par returns.
The rolling returns chart confirms the statements above. While the buy-and-hold benchmark dips into prolonged periods of negative returns, the strategy fares significantly better. As a result, the tracking chart shows how the strategy expanded its lead over the benchmark with each cycle.
Account & Tax Considerations
When Hokey Pokey changes its selection of ETFs, it triggers taxable events. Consequently, the strategy works best in tax-deferred accounts. However, due to its lower downside, Hokey Pokey might nonetheless be useful portfolio component in taxable accounts.
Hokey Pokey invests in up to two ETFs simultaneously. Therefore, it works well with account sizes of $3,000 or more.