Using This Page

“Momentum” and “relative strength” refer to favorable price performance characteristics of securities, and there is a substantial amount of supporting academic research for a simple portfolio management method that seeks to capitalize on the likelihood of the near-term or medium-term persistence of those characteristics. The portfolios on this page are all managed using a particular version that method, with trading occurring (if at all) at the close on the first trading day of each month. The top parts of each of the charts below show what a dollar invested would produce over the displayed date range, for the Retail Backtest and Benchmark portfolios. Only long positions in the ETFs are involved; no short sales. None of the RB portfolio charts on this site are of actual trading experience; all are “hypothetical”, representative of what would have happened had the given program been in use in the past. The entries in the tables below are as follows:

  • The Sharpe Ratio is the ratio of the annualized return to its volatility, with the return being that in excess of the return on cash and with the volatility being based on the standard deviation of the excess return from its mean.
  • However, the Annualized Return entries are the total return, with the return on cash not being subtracted off.
  • The Per-ETF Trades/Year entry for each portfolio is the expected average yearly total of all of the trades in any single ETF of the portfolio; it is not the total yearly average number of trades for all of the ETFs of the portfolio.
  • The Per-ETF Trades/Year figures are understood to be high enough as to potentially daunting for retail investors, because in order to realize the benefits of the program's portfolio optimization, as determined through testing, the investor would have to participate fully in an entire portfolio. And the total number of trades per year would be the Per-ETF Trades/Year figure multiplied by the total number of ETFs in the portfolio. But help is on the way. It is highly likely that Retail Backtest will soon be able to offer a program that is more suitable for individuals managing their own money, or for advisors managing small accounts— one that involves somewhat less trading (e.g., an average of 3 times per year per ETF) and involving just a few select ETFs, or even just one ETF if that is required.
  • The “Rebalanced Benchmark”, shown in red on the chart, is a portfolio that simply consists of account equity being applied equally to long positions in each of the ETFs. The frequency of rebalancing is not critical and could be, say, once per year.

The performance of Retail Backtest's own algorithm for the method is shown not only on the charts and tables below but also in the article “Does Momentum Work?”, which also explains the tests that have been applied to assess the program's reliability. The article completely discloses the algorithm in all details, in readable English (not “technospeak”), and it is available now via the Articles menu on this site. (The Sharpe ratios shown below are not numerically exactly the same as those in the article because the date ranges are somewhat different.)

Momentum and the “International” Portfolio— Large-Cap ETFs (Dividends Reinvested)

All Data[Audit]
Click-drag to zoom in; double-click to zoom out; shift-click-drag to pan.

Performance Summary

This portfolio is dynamically managed subset of the following list of ETFs: EWA, EWC, EWG, EWH, EWJ, EWS, EWU, EWW, MDY and SPY.

Scheme Per-ETF
Trades/Year
Annualized Return Sharpe Ratio
RB Portfolio 3.8 9.0% 0.52
Rebalanced Benchmark minimal 7.7% 0.29
Note: Column entries are explained at the top of this page.
Momentum and the “Mostly USA” Portfolio— Liquid ETFs (Dividends Reinvested)

All Data[Audit]
Click-drag to zoom in; double-click to zoom out; shift-click-drag to pan.

Performance Summary

This portfolio is dynamically managed subset of the following list of ETFs: DIA, EEM, IWM, IWV, IYR, QQQ, RSP and SPY.

Scheme Per-ETF
Trades/Year
Annualized Return Sharpe Ratio
RB Portfolio 4.8 8.9% 0.66
Rebalanced Benchmark minimal 8.6% 0.39
Note: Column entries are explained at the top of this page.
Momentum and the “Sector” Portfolio— ETFs, Trading in the USA (Dividends Reinvested)

All Data[Audit]
Click-drag to zoom in; double-click to zoom out; shift-click-drag to pan.

Performance Summary

This portfolio is dynamically managed subset of the following list of ETFs: XBI, XES, XHB, XLB, XLE, XLF, XLI, XLK, XLP, XLU, XLV, XLY, XME, XOP, XPH, XRT and XSD.

Scheme Per-ETF
Trades/Year
Annualized Return Sharpe Ratio
RB Portfolio 5.3 10.1% 0.76
Rebalanced Benchmark minimal 10.2% 0.46
Note: Column entries are explained at the top of this page.