
MAI Indexes: Momentum Investing Strategies
Advanced signal processing and integrated bear market strategies have forever changed the art and science momentum investing.
Advanced signal processing and integrated bear market strategies have forever changed the art and science momentum investing.
The performance of cars and telephones has improved considerably since Modern Portfolio Theory (MPT) was developed in 1952. Yet MPT’s simplistic “diversify-and-rebalance” mantra remains dominant in the industry. Technology advances occur when additional underlying problems are identified and solved. Since the advent of MPT, we've come to know that (1) there is momentum in market data, (2) noise in market data disrupts the momentum signal and reduces the quality of investment choices, (3) there are known methods for noise reduction, (4) bear markets are different from bull markets, (5) there are multiple forms of hindsight bias, (6) AI tools can both produce and reduce hindsight bias, and (7) risk is not a one-dimensional problem cured by a single dose of diversification. It’s a multidimensional problem, and diversification’s passive risk dilution is only just the start.
MAI Indexes are based on Temporal Portfolio Theory (TPT), a significant extension to MPT that additionally employs temporal (time-based) market data and the cross-disciplinary sciences of Matched Filter Theory, Differential Signal Processing, Adaptive Filtering, Fuzzy Logic, and others. These are the same tools that have enabled WiFi, USB, iPhones, digital TV, assembly robots, and remotely controlled rovers on Mars to perform so well.
"If you want different results, do not do the same things." A. Einstein
While most Indexes focus on a specific slice of the market, such as a particular sector, factor, theme, or asset class, MAI Indexes are complete, self-contained tactical portfolio management systems that evaluate over 500 ETFs each month and select a portfolio that seeks to provide the five things investors want most.
The MAI Bull-Rider Bear-Fighter Index begins with an 80/20 equities/bonds allocation typical of a classic Growth portfolio. Each of eight underlying momentum strategies selects one ETF (its momentum leader) for the portfolio to hold. During bull markets, the Index allocates 35% to sectors, 15% to countries, 10% to global regions, 10% to factors, 10% to style-mix, and 20% to bonds, treasuries, and gold.The index automatically allocates 100% to defensive ETFs when bear market strategies are signaled by StormGuard Armor.
The MAI SectorSurfer Momentum Index begins with a 100/0 equities/bonds allocation typical of a classic aggressive portfolio. Each of six underlying momentum strategies selects one ETF (its momentum leader) for the portfolio to hold. During bull markets, the Index allocates 70% to four economic sector ETFs and 30% to two geo-political sector ETFs. The index automatically allocates 100% to defensive ETFs when bear market strategies are signaled by StormGuard Armor.
See how MAI Indexes use genetic algorithms to eliminate hindsight selection bias, expand its universe of candidate ETFs, and build on its powerful Temporal Portfolio Theory roots to reduce market noise and improve the probability of making better momentum investing choices that lead to higher returns and lower risk, as detailed in our book "Conquering the Seven Faces of Risk."
At the very heart of momentum investing performance is its proficiency for extracting trend signals from noisy market data. Merlyn.AI employs the cross-disciplinary mathematics of electronic signal processing and matched filter theory, the very same mathematics that enables Ethernet, WiFi, and smartphones to perform so well. See all of this graphically demonstrated in just 7 minutes.
Conquering the Seven Faces of Risk breaks new ground with its development of Temporal Portfolio Theory as a critically important extension to MPT. The new cross-disciplinary mathematics of electronic signal processing and problem segmentation clarify momentum signals and apply bear market strategies to their separate problem class. Risk avoidance is far superior to ordinary risk dilution.
Please drop us a line (above) if you have any further questions about our momentum investing indexes or their integrated bear market strategies.
Merlyn.AI, SectorSurfer, AlphaDroid, True Sector Rotation, SwanGuard, StormGuard, StormGuard-Armor, Own-the-Bubble, Polymorphic Momentum, MAI Indexes, Temporal Portfolio Theory, Bull-Rider Bear-Fighter, and SumGrowth Strategies, are all trademarks of SumGrowth Strategies, LLC. Seattle WA 98125. MAI Indexes, SectorSurfer, and AlphaDroid are services of SumGrowth Strategies, which is not a registered investment advisor and doesn't provide professional financial investment advice specific to anyone in particular. SectorSurfer, AlphaDroid and Merlyn.AI provide algorithmic strategy analysis tools that produces trade signals according to the set of funds provided for analysis. Strategy performance is hypothetical, based on trading at the market close of trade dates, and does not include associated trading fees or account fees.
MAI Indexes: A SumGrowth Strategies, LLC service.
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“SNUG Index” refers to: Merlyn.AI® SNUG Tactical Growth & Income Index “DUDE Index” refers to: Merlyn.AI® DUDE SectorSurfer Momentum Index
“WIZ Index” refers to: Merlyn.AI® WIZ Bull-Rider Bear-Fighter Index
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MAI Indexes is a trademark of SumGrowth Strategies, LLC
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