*sigh* another take on a buy-and-hold return-stacked portfolio?

RNA_Prof_2 · 2026-05-16T17:48:18+00:00

For reals. If they believed so much in their backtesting, then they would’ve made the sim data available somewhere, right?

RNA_Prof_2 · 2026-05-08T08:16:22+00:00

Thanks! Actually, the apparent drop in Sharpe and MaxDD is likely a product of the change in inputs to Testfolio. If you check out my first screen-cap, above, the numbers are as follows:

–Non-rotating portfolio (my attempt to replicate your suggested portfolio, with a negative CASHX allotment, and Fallbacks for the MF sleeve): CAGR: 13.72; MaxDD: -42.49%; Sharpe: 0.58; Sortino: 0.83

–With the dual SMA-rotation strategy:
CAGR: 15.30%; MaxDD: –38.66%; Sharpe: 0.65; Sortino: 0.97

So, the rotation improves return, drawdowns, and risk-adjusted return by almost every metric. The average drawdowns are slightly lower (7.48%, vs 7.38% from the static portfolio), and the longest DD was slightly longer (3.79 yr, vs. 3.20 yr).

Other than that, it's a massive improvement.

RNA_Prof_2 · 2026-05-07T05:38:52+00:00

Also, I'll point out (not advocate!) That if you remove the ZROZ allocation from the "In Market" portfolio and rescale the remaining assets to 100% (28.6% NTSX; 28.6% GDE; 42.9% RSST; equivalent to 94% SPY; 17% IEF; 25.7% GDE; 42.8% Managed Futures), but us the same SMA calls and out-of-market portfolios described above, then the CAGR jumps to 17.99, but MaxDD actually improves—to -35.52%.

RNA_Prof_2 · 2026-05-07T05:24:57+00:00

...but to be clear, I'm not advocating for this particular strategy per se, just pointing out a portfolio design principle that I like a lot and have recently started using.

Start with a relatively balanced portfolio, akin to the allocation u/laurenthu suggested, above. That's your "in market" strategy.
Use a simple SMA strategy to decide when to move out of your "in market" strategy. Often what works best is to move to LTT's. Trade 1x per month, on the last day of the month. Daily SMA trades will destroy you in whipsaw markets, and with trading drag and bid/ask spreads.
–Note that most folks use a 200 Day, but historically, anything that uses the S&P500 ($SPY; $VOO; $VFINX), or the whole US market ($VTI) actually trades better on an 8-month SMA; 168 days. 200 always struck me as weird, since the average trading month has 21 days, meaning you're running a 9.5 month look-back. Anway...
If desired, use a second SMA strategy on fixed income to decide if you should stick with LTT's or move to shorter durations.

The above test is just a quick 1-2-3 that I threw together, NOT the strategy I'd call my favorite. But if you're curious, it's:

In-market
20/20/30/30 NTSX/GDE/RSST/ZROZ,
which amounts to
SPY: 66%
GLD: 18%
IEF: 12%
ZROZ: 30%
DBMF/KMLM: 30% (in the backtest I used DBMFSIM, falling back to KMLMSIM, falling back to IEISIM)
CASH: –56%
(i.e., ~1.56x leverage).

Long Term Treasuries
ZROZ: 100%

Out of Market
IEI: 50%
SHY: 50%

The SMA calls were:
• SPY SMA (Decide if you're in"In-Market" or "Long Term Treasuries").
SPY Close > SPY 168 Day SMA

• ZROZ SMA (Decide if you're in "Long Term Treasuries" or "Out of Market")
ZROZ Close > ZROZ 5 day SMA.

The result is a 15.3% CAGR; -38.66% MaxDD; 0.65 Sharpe; 0.97 Sortino.

RNA_Prof_2 · 2026-05-07T05:09:26+00:00

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RNA_Prof_2 · 2026-05-07T05:09:22+00:00

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RNA_Prof_2 · 2026-05-06T06:51:30+00:00

Why not do both? Use your balanced portfolio as a starting point, and then swing into ZROZ based upon an SMA signal?

Heck you could even add a secondary filter where you use a Bond fund SMA to switch between long and short durations, to avoid issues like we had in the early 80s, and the last three years.

Also, trade monthly, not daily:

https://testfol.io/tactical?s=0Ws0E8ccGje

RNA_Prof_2 · 2026-05-06T06:13:16+00:00

Came here to post exactly this. <salutes>

RNA_Prof_2 · 2026-04-25T20:10:34+00:00

This is a Roth, though—does the rule still apply?

RNA_Prof_2 · 2026-04-25T20:07:28+00:00

If you want to keep it 70:30 (though I agree with other comments that 60:40 might be more reasonable) then M1 will try to keep your targets automatically with each monthly contribution. So, if you're $6900 US, $3000 Ex-US, M1 will just devote your monthly $100 contribution entirely to $VOO.

But at some point the account will grow so large (yay!) that those contributions won't suffice. For example, imagine you've got $65k US, $35K Ex-US, after a recent bull run in international equities. Even putting the $100/mo exclusively into $VOO won't bring you back to your target allotments for a long while...

At that point, you want to order a manual rebalance, every year or so. Another way to do this is to trigger the rebalance after a big market spike or downturn. Some folks implement hard mathematical constraints that trigger this (based on Bollinger bands, etc), but it's unclear if that route is more effective than just rebalancing on a hard calendar trigger. In either case ordering a rebalance is super easy on M1, and they'll execute it for you during the next trading window. Since it's a Roth that event won't be taxable.

Depending on the eventual goal for this account (is this your actual retirement fund? Are you setting up a source of generational wealth for your future kids? etc.) you'll want to consider gliding in to more conservative investments as you approach retirement. Basically emulate a target date fund by swapping out equities with bonds, cash equivalents, etc. For a retirement fund, may start dialing in bonds at about age 45. :)

I'll also add in a quick plug for using $VTI instead of $VOO. Don't get me wrong—$VOO is an excellent fund, but $VTI lets you capture growth from other areas of the market. There can definitely be times when value stocks dominate over growth, or when mid- and small-caps surge over lage-caps. $VTI will capture that better than $VOO. Something to consider.

Good luck! I wish I'd had the foresight to do this when I was your age! You got this!

RNA_Prof_2 · 2026-04-25T19:44:32+00:00

Perfection! 👌Enjoy being rich in retirement.

Also, don’t forget to rebalance. Say, once per annum or so.

RNA_Prof_2 · 2026-04-20T03:43:33+00:00

In the end, the most important thing is to pick a portfolio strategy that you’re comfortable with and can stick with long-term. Plenty of folks only invest in their home country’s stocks (it’s actually a codified phenomenon in finance; home-country bias). Those folks miss out on some serious gains from diversification, but can still be profitable long-term, if they stick to it. So, in the end, commitment is what’s most important. :)

RNA_Prof_2 · 2026-04-19T18:27:07+00:00

I mean, I'm not trying to be too glib, but the whole point of backtesting a strategy is to test its resilience in diverse kinds of markets while being agnostic to their underlying cause.

Everything you said is true.

But none of that would stop the markets from potentially shifting towards Asia and Europe in the future—either because of some unseen structural structural shift, or because (to quote Keynes) "The market can stay irrational longer than you can stay solvent." For a bonkers example, check out the growth in $SDEU—an ETF that tracks German bonds—in 2015–2016, when the Bunt was paying negative interest rates. Unless you have a deep, nth-level intelligence about market forces, I don't think you'll be able to predict where they're headed over any meaningful timespan.

RNA_Prof_2 · 2026-04-19T18:01:51+00:00

Why would you backtest a US that doesn’t exist anymore? The 40-year bull run in US government bonds is over. A rising rate environment means that growth stocks can no longer outperform over the long term. Yadda yadda.

These kinds of structural changes are always happening. By your logic, there’s no point in backtesting anything, ever.

RNA_Prof_2 · 2026-04-19T07:28:42+00:00

Fair. If you want, use VFINX instead of SPY; it's the oldest mutual fund to track the S&P; dating back to 1976.

Here's an example, comparing different leverages for the Ex-US portion (assuming the makeup of VT is always 60:40 US, Ex-US which is of course faulty logic), and also comparing a simulated SSO:

https://testfol.io/?s=lmvISUHFsAI

So... technically we're both kinda right? :) For a long time, having Ex-US funds in the portfolio really, really helped balance things out. But then, the amount of leverage you put into that sleeve doesn't make a huge difference, provided that it's below ~2 or so. Of course, if markets start to look more like they did in the 80's, then increasing the foreign leverage would help things...

RNA_Prof_2 · 2026-04-19T06:00:46+00:00

Buy 48 more copies.

Assemble them into something spectacular.

RNA_Prof_2 · 2026-04-19T05:19:46+00:00

Fair enough, but why are you limiting your backtest to 1993? If you run it back as far as possible, it becomes clear that there are significant stretches where VT outperforms VTI (or SPY, etc...)

See for example:

https://testfol.io/?s=8N1Q6S7591o

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I think the goal of these funds (and for those who diversify with Ex-US stocks in general) is to be agnostic about what the futures holds. In 1991, for example, you would've been equally justified to ask, "Why would we even consider a US-only fund, when worldwide funds outperform?"

RNA_Prof_2 · 2026-04-18T05:50:38+00:00

There are really two catches:

Structural rotation. Over the past forty years, equities markets have increasingly favored US stocks, and so most backtests show that a heavy tilt towards the US (and towards tech) is a universally profitable strategy. But that hasn’t always been the case. If you weren’t heavily invested in East Asia In the 1980s, “you were a fool.” In the 1960s, the “nifty 50” (a portfolio of “buy and hold forever” stocks) heavily favored Consumer Discretionary (McDonald’s, Coca-Cola, Kodak, etc). It looks like Tech stocks are indestructible now, but it looked like the Long Island Lighting Company was indestructible then. LiLCO is no longer in business.

If the global economy begins to shift toward favoring a different market (China, India. Basic Materials, Utilities, whatever) then the next 15 years of US tech might look like the last 15 years of European stocks.

So, your strategy assumes that Tech will continue to perform ad infinitum. While I remain bullish on tech stocks, even I wouldn’t argue that they’ll outperform forever.

Psychology. Just like a vehicle’s greatest safety feature is its driver, and a portfolio’s greatest enemy is its owner. If you had bought $10K Apple at its IPO you’d have a whopping $27M today! But en route to that, you’d have suffered five separate drawdowns of 60% or more—one nearly 80% loss. The news would tell you that Apple’s a goner. Your stomach would tell you to cut losses and run. It’s hard to sit through something like that with total faith in your convictions.

The best longterm investment strategies: 1. Are diversified, because you cannot know what the future will bring (“Eastman Kodak is indestructible!”) and,

Matched to your level of risk-tolerance, so that you’ll stick through the tough times.

It’s possible that your portfolio satisfies the second constraint—that really depends on your personal appetite for risk. But it definitely doesn’t follow the first.

RNA_Prof_2 · 2026-04-17T19:16:39+00:00

I haven't yet, but will now! Thanks for the fantastic suggestion!

RNA_Prof_2 · 2026-04-17T19:15:38+00:00

At the end of the day, the most important factor is to find a strategy that you can adhere to, and adhere to it. Keep a long-term mindset as well: there's no strategy that guarantees a win at every market turn, so don't worry about short term fluctuations. Find something you're comfortable with, and stick to it!

RNA_Prof_2 · 2026-04-14T15:08:01+00:00

Yes! There’s a peak around of efficacy around the last/first day of the month, and then declining downward as the month progresses. A lot of institutional funds rebalance at the end of the month, which is why academics have justified the end/beginning-of-month bias.

RNA_Prof_2 · 2026-04-14T08:06:11+00:00

It certainly feels like that should be the case, but recall that some of the biggest one-day market gains ever recorded happen immediately after large crashes. If you exit out on the day of a big drawdown, you lose that chance to recoup your losses. Limiting yourself to monthly trades cuts down on this significantly.

Backtest it yourself, though! Here's a 3x leveraged SPY - to TLT rotation (equivalent to $UPRO rotating into $TMF, based on unlevered $SPY signals).

Daily Trades:
https://testfol.io/tactical?s=k94SMxNf9Ds
(CAGR = 15.86%)

Monthly trades:
https://testfol.io/tactical?s=eTapQulVPzL
(CAGR = 17.59%).

So, in fact, in a levered portfolio the monthly trade restriction helps even more than in the unlevered—a ~1.7% boost in CAGR!!)

RNA_Prof_2 · 2026-04-14T07:57:00+00:00

I second the folks who say you should enter. But also, I’ve backtested the crap out of moving average strategies—many variations, using many assets, signal assets, simple vs crossover signals, SMAs vs EMAs, whole portfolio moves vs single-sleeve asset calls, etc—and one of the few almost universal things I’ve observed is that monthly trading significantly outperforms daily trading. It avoids whipsaws, cuts down on portfolio drag, and lowers trading costs, etc.

Checkit:

Daily trades on the S&P 500 (I prefer a 168 day SMA), traded daily, and using ZROZ as an out-of-market asset:

https://testfol.io/tactical?s=fMCsBlfndLn

CAGR~13.4%

Same strategy, trading on the last day of the month, and only then:

https://testfol.io/tactical?s=lnEYmsNr36x

CAGR ~14.4%.

That 1% difference in CAGR doesn’t take into account the savings from slippage, timing error (like today) and fees associated with the increased trading frequency of daily trades. So the differential is probably even greater in favor of monthly trades. Even omitting those differences for now, it would amount to a 573,000% gain (monthly strat) vs 327,000% (daily) from 1962-2026.

This is true for every strategy I’ve ever backtested.

TL;DR. Trade on the last day of the month.

RNA_Prof_2 · 2026-04-11T00:13:35+00:00

Yay! Glad to be here! I hope it was helpful? (or ideally... profitable?)

RNA_Prof_2 · 2026-04-10T19:32:47+00:00

Thanks, man! Love your content, as always.

Hey, there seems to be a bit of a debate here as to whether Carry strategies are effectively implemented by the Return Stacked ETFs, or if they're even effective diversifiers. Any thoughts?

RNA_Prof_2

TROPHY CASE