No. of Recommendations: 9
Here's the last 10 years of the strategy as reported in the paper, versus holding SPY (SPY annual returns from Yahoo finance).
Year Strat SPY Strat Port SPY Port
$10,000 $10,000
2014 -5.2 13.5 $9,480 $11,350
2015 -10.8 1.25 $8,456 $11,492
2016 4.6 12 $8,845 $12,871
2017 36 21.7 $12,029 $15,664
2018 -7.5 -4.6 $11,127 $14,943
2019 13.6 31.2 $12,640 $19,606
2020 19.9 18.4 $15,156 $23,213
2021 10.3 28.8 $16,717 $29,898
2022 -9.1 -18.2 $15,196 $24,457
2023 12.8 26.2 $17,141 $30,865
Apologies if the formatting is a bit off in the table above, but you can see that holding SPY for the past 10 years has been hard to beat. I'm stating the obvious to members of this board, but when it comes to following a momentum system, simply using SPY (momentum based on market cap of US companies), has been difficult to beat - at least it sure has for me. Will that continue to be the case? It's hard to tell, but... certainly with all the index investing that is done these days, one could argue that SPY has a tailwind just from that alone.
Like many others on this board, I've put a lot of time and effort into trying to find strategies that would beat something like SPY - you have some winning years and think you're onto something, then you have some losing (to SPY) years and start to question whether or not you were fooled by randomness.
Investing suffers from the rather strange phenomenon where expending more effort does not necessarily lead to better results. In most things we do in life, when you put more effort into something, you experience improved results. With investing, that's not always clear. Certainly the obvious things (that many don't do!) help results (regular saving, asset allocation, etc.), but you start to get into very specific strategies around market timing or stock/ETF picking, then... it's much tougher to say.
I have to routinely remind myself that when you get into market strategies, you're not playing against the "average investor" out there - you're playing against people that look for market edges as a full-time job, who have time to build all types of models, collaborate with other sharp minds, etc. As a long-time mediocre 5k runner, if I went out and thought I was going to compete with the UCLA cross-country team, I'd know without question that I was going to get beaten (and badly). As an investor, I'm also competing with hedge funds, thousands of analysts, etc. - the odds of beating them (with any level of consistency)... are likely not great, if I'm totally honest with myself. Just felt like saying this - as it's been on my mind a lot lately!
Lee
