Applying A Dual Momentum Model To The IVY 10 Portfolio | Seeking Alpha
Lowell Herr has written an outstanding article about handily beating a traditional stocks-bonds portfolio with the Ivy 10 Portfolio from a book by Mebane Faber and Eric Richardson. Lowell does a good job in explaining how the system works. You buy the top two momentum stocks after a review every 33 days. Then, you sell any stocks that are underperforming SHY, which is a short term bond ETF. You don't want to lose any money although occasionally you will have slight losses.
Lowell's dual momentum ETF plan had an average compound gain of 14.7% over a 9 year period which included the 2008-2009 bear market. Is your current portfolio beating this 15% compound return momentum plan? I plan to allocate up to 20% of my portfolio to this plan over time. It will be done gradually, though, because I already have some strategies that are working for my current portfolio. As we get closer to the stock market top before the next bear market, Lowell's plan could easily beat the market during this time frame along with providing downside protection since stocks that underperform SHY will be sold.
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