Portfolio vs. 60/40 vs. S&P 500
All Data
10 Years
**S&P 500 backtest to 1972 and 60/40 backtest to 1970
The Trend is Our Friend - Global
Details
The Trend is Our Friend strategy was developed by Andrew Clare, James Seaton, Peter N. Smith, and Stephen Thomas.
The strategy was outlined in their paper: The Trend is Our Friend: Risk Parity, Momentum, and Trend Following in Global Asset Allocation.
At the time of writing, Clare, Seaton, and Thomas were at the Cass Business School at City University London while Smith was at the University of York.
The strategy uses a combination of risk parity and trend following to determine when to move in and out of assets and the weighting.
On average, the portfolio holds 20% in equities, 26% in bonds, and 54% in cash, commodities, and real estate.
Average Asset Allocation & Recommended ETFs
Performance Metrics
All Data
10 Years
Annual Return
8.7%
Sharpe Ratio
0.73
10 Year Annual Return
2.1%
Volatility (annualized)
5.6%
Max Drawdown
-9.0%
Positive Periods
72.5%
Dot Com Annual Return
4.5%
Great Financial Crisis Return
8.6%
Trade Frequency
Monthly
Ulcer Performance Index
1.9
Strategy Rules
This strategy trades once per month.
- On the last trading day of each month, use a simple 12-month risk parity calculation to determine the portfolio weighting for the 8 assets above (excluding cash).
- Use the calculation for risk parity described by AQR Capital in “Leverage Aversion and Risk Parity.“
- Invest in the assets that will close above their 10-month moving average.
- If the asset will close below their 10-month moving average, invest that portion of the portfolio in cash.
- Hold all positions until the last trading day of the following month.
How to Invest in the Trend is Our Friend - Global Portfolio
M1 Finance is the recommended platform to invest in this portfolio. Find out why.
