Fair Weather Investing

Process

Fair Weather Investing, as applied to our actively managed portfolios, aims to keep the investor holding a security only as long as it maintains an upward price trend. When the security is no longer able to maintain upward momentum, the security is sold and the proceeds moved to a cash or cash equivalent holding until such time as momentum returns.

Fair Weather Investing

Research

Mebane Faber, in a 2009 whitepaper, back-tested a long-term moving average strategy on a hypothetical portfolio of equal weight bonds, US stocks, International stocks, REITs, and commodities. Faber found that between 1973 and 2008, the portfolio would have made a profit in every year but one and returned 11.3% before taxes and commissions. Buying and holding the same portfolio would have returned only 9.8%, whilst showing losses in six of those years.

Thomas Kilgallen’s whitepaper, Testing the Simple Moving Average across Commodities, Global Stock Indices, and Currencies, illustrated how applying a “simple moving average strategy” to certain securities over a period of several decades provided before-tax risk-adjusted returns superior to a Buy and Hold strategy.