Portfolio vs. 60/40 vs. S&P 500
All Data
10 Years
**S&P 500 backtest to 1972 and 60/40 backtest to 1970
Vigilant Asset Allocation - G4 Aggressive
Details
The Vigilant Asset Allocation – G4 strategy was developed by Wouter Keller and JW Keuning.
It’s based on their paper Breadth Momentum and Vigilant Asset Allocation (VAA)
Like some of the other strategies developed by Keller and Keuning, it uses a “breadth momentum” test to determine how much of the portfolio should be invested in risk vs. safe assets.
The strategy, on average, allocates 41% to equities, 36% to bonds, and 23% to cash.
Average Asset Allocation & Recommended ETFs
Performance Metrics
All Data
10 Years
Annual Return
16.8%
Sharpe Ratio
0.96
10 Year Annual Return
4.1%
Volatility (annualized)
12.4%
Max Drawdown
-16.9%
Positive Periods
75.9%
Dot Com Annual Return
4.7%
Great Financial Crisis Return
23.2%
Trade Frequency
Monthly
Ulcer Performance Index
2.7
Strategy Rules
This strategy trades once per month.
The strategy assets are broken into two categories:
- Risk Assets: SPY, EFA, EEM, and AGG
- Safety Assets: LQD, IEF, and BIL
On the last trading day of the month:
- Calculate the momentum score of all the assets above.
- Momentum Score = (12*(p0/p1)) + (4*(p0/p3)) + (2*(p0/p6)) + (p0/p12) – 19
- p0 = today’s price, p1 = price at close of last month, etc…
- If all of the Risk Assets have a positive momentum score, invest 100% of the portfolio in the asset with the highest momentum score.
- If any of the Risk Assets have a negative momentum score, invest 100% of the portfolio in the defensive asset with the highest score.
- Hold the position until the final trading day of the following month.
How to Invest in the Vigilant Asset Allocation - G4 Aggressive Portfolio
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