Portfolio Comparison: Decision Moose

In my new upcoming portfolio comparison series, which begins in June, I will be tracking and comparing several different potential investing strategies. During May, we’re looking at each strategy in detail. Today’s strategy is one familiar to long-time readers of this blog: Decision Moose.

Background

If you really want to understand Decision Moose, your best bet is to visit the official site and read everything you can get your hands on. However, I will nonetheless briefly summarize my understanding. At its core, Decision Moose is a computer-based model that attempts to track the flow of assets among various different asset classes (such as gold, cash, and stocks in various regions of the world). By choosing ETFs to represent these asset classes and looking at the short-term and medium-term performance of these ETFs, the model attempts to determine which asset class has the best chance of performing well. The model then reports which ETF the prospective investor should buy or hold in order to follow the model.

Implementation

This portfolio will be implemented using a Watch Account at Folio Investing. On the first Monday, I will buy the current Decision Moose signal, regardless of its status as a switch or hold. Each week thereafter, I will check the signal, and if a switch is signaled, I will make the trade in the portfolio as of Monday’s closing price. While, in The Art of the Switch, Dirlam suggests that it may be possible to improve on the model’s returns by carefully timing the switching between ETFs (perhaps using margin), this entirely mechanical approach saves me from making potentially poor decisions regarding the switch.

Analysis

Since its inception in 1996, Decision Moose’s overall performance has been excellent. However, the past couple of years have been almost entirely neutral for the Moose. However, I personally have high hopes for this model and its ability to regain some of its former glory. When all is said and done, I wouldn’t be surprised to see Decision Moose among the top portfolios in this comparison, but in the end, we can only sit back and watch.

Disclaimer: This post is a description of my own forays into investing, offered as general market commentary, and should not be construed as investment advice or the recommendation of a particular security over any other.