Once a month we ship a small batch of new strategies. May is diversification month. The five strategies below cover the four classic ways a portfolio can fall apart: stocks crash and stay down, bonds underperform inflation, both happen at the same time, and the trend reverses just as you finally lean in. Each strategy hedges a different combination of those failure modes. Run side by side, they cover the corners that any single strategy misses.
Three are community classics, one is a tactical workhorse with a long published track record, and one is a BestFolio Original built on capital-efficient ETFs that did not exist five years ago. We backtest all five with our standard fallback chain (real data when available, careful synthetic proxies before that). The combined record is on prod now and listed below.
The thesis: five different bets on what could go wrong
"Diversification" is a worn word, but it has a precise meaning when you stop thinking of it as "own a lot of stuff" and start thinking of it as own things that fail in different scenarios. The five strategies in this release each carry a different worldview about what goes wrong:
- Return Stacked Quartet assumes you can layer four uncorrelated return streams on top of each other and compound them, accepting one lump of equity beta as the baseline.
- 4-3-2-1 Dragon assumes a multi-decade regime where each economic state (growth, deflation, inflation, fiat debasement) gets a dedicated sleeve, and rebalancing harvests the volatility between them.
- Cockroach Portfolio assumes the future will look like one of the 100-year bad scenarios, and that an equal-weight stocks/bonds/gold/managed-futures/cash mix is the version that has historically survived all of them.
- Diversified Dual Momentum assumes the past 12 months tell you something about the next one, and rotates between US equities, international equities, REITs, and bonds based on relative trend.
- KDA (Kipnis Defensive Adaptive) assumes momentum works but only when a small canary basket is also rising; otherwise pile into bonds, no questions asked.
None of those five worldviews is right all the time. The point of running them together is that the spots where each is wrong are not the same spots. We will get to the regime table in the back half. First, the strategies themselves.
1. Return Stacked Quartet
Author: BestFolio Research. Type: fixed allocation. Rebalance: annual. Backtest: 1989 to 2026 (37 years).
This one is ours. The thesis behind Return Stacked Quartet is simple: in 2024, three new ETFs finally made it possible to hold roughly 1.4x notional exposure to four uncorrelated assets in a passive, no-margin, taxable-account-friendly wrapper.
The allocation:
- 20% NTSX (90% S&P 500 + 60% Treasury futures)
- 20% GDE (90% S&P 500 + 90% gold futures)
- 30% RSST (100% S&P 500 + 100% managed futures)
- 30% ZROZ (long zero-coupon Treasuries)
Three of the four wrappers are capital-efficient ETFs: each one packs two return streams into the space of one. The 60% in NTSX, the 90% in GDE, and the 100% in RSST are all delivered via futures sitting on top of a cash equity sleeve. ZROZ is the unleveraged anchor: long-duration zero-coupon Treasuries that explode in value when rates collapse.
Why these weights specifically? We ran a 286-config sweep at 10% increments across the four legs and picked the maximum-Sharpe combination. The 25/25/25/25 equal-weight version is close behind in the sweep, but the optimum tilts slightly toward managed futures and long bonds (the two legs that contribute the most negative correlation to equity).
Backtest (1988-12 to 2026-04, ~37 years, annual rebalance):
- CAGR: 13.79%
- Sharpe: 1.15
- Sortino: 1.52
- Max drawdown: -30.4%
- Annualized volatility: 11.9%
What is honest to say about these numbers. RSST has been live since late 2023. GDE since 2022. NTSX since 2018. The 37-year history is reconstructed by composing the underlying assets (90% SPY + 60% IEF for NTSX, etc.) using BestFolio's standard fallback chain. The expense-ratio-only cost convention slightly understates the real cost of leverage. The strategy should work in the future for the same reason it works in the synthetic past: stacking uncorrelated streams compounds capital faster than holding any one alone. But anyone telling you they have 37 years of live data on RSST is selling something.
Who this fits. Investors who want growth-oriented diversification but do not want to manage margin or futures accounts. The 1.4x effective exposure means it is not the lowest-volatility option here; it is the one with the highest expected return.
2. The 4-3-2-1 Dragon
Author: Community research, inspired by Artemis Capital's "100 Year Portfolio". Type: fixed allocation. Rebalance: quarterly. Backtest: 1994 to 2026 (32 years).
Chris Cole's original Dragon Portfolio took the idea of regime-balanced allocation seriously. Each asset class is assigned to one of four economic regimes (growth, deflation, inflation, fiat debasement), and the dollar weights are set so each regime contributes roughly equal risk. Here is the published 2020 paper allocation next to what BestFolio actually runs as the 4-3-2-1:
| Sleeve | Cole 2020 paper | 4-3-2-1 on BestFolio |
|---|---|---|
| Domestic equity | 24% | 40% (30% SPY + 10% AVUV) |
| Fixed income (long bonds) | 18% | 20% (ZROZ) |
| Gold | 19% | 10% (GLD) |
| Commodity trend / managed futures | 18% | 30% (KMLM) |
| Active long volatility | 21% | 0% (no retail ETF analog) |
The community version drops Active Long Volatility entirely. Long-dated options and tail-risk overlays are not available in a clean retail ETF wrapper, so the community absorbed the missing crisis alpha by raising managed futures from 18% to 30%. Equity went from 24% to 40% with a small-cap value tilt for long-horizon factor exposure. Different bet, but in the same regime-diversification spirit. Treat 4-3-2-1 as the workable retail approximation, not as Cole's allocation.
The 4-3-2-1 Dragon on BestFolio is available in three flavors:
- 4-3-2-1 Standard: 30% SPY, 10% AVUV (US small cap value), 30% KMLM (managed futures), 20% ZROZ, 10% GLD. CAGR 10.71%, Sharpe 1.20, MaxDD -19.6%.
- 4-3-2-1 Capital Efficient: a 1.5x version that uses NTSX/GDE substitutions to free up capital for more managed futures. CAGR 12.65%, Sharpe 1.07, MaxDD -26.3%.
- 4-3-2-1 Leveraged: a 2x version using UPRO, TMF, UGL. CAGR 14.72%, Sharpe 0.97, MaxDD -36.5%.
The Standard version is the one most people run. Quarterly rebalancing harvests volatility between the legs without overtrading. The 1.20 Sharpe is the highest of any strategy in this batch, and the -19.6% max drawdown is one of the calmest 32-year records on the platform.
What makes the Dragon distinctive is the 30% allocation to managed futures. Most balanced portfolios cap MF at 5% to 10%. The Dragon's 30% is unusual, and it is the line item most likely to drift far from US equities in a stress regime. In 2022, when stocks and bonds both fell hard, KMLM made roughly +30%. That is the leg that turned the Dragon from "another all-weather" into something that genuinely paid for itself in the year it mattered.
Who this fits. Investors who like the all-weather thesis but want more crisis alpha than Dalio's classic mix delivers. Pick Standard for the cleanest record. Pick Capital Efficient or Leveraged only if you understand what 1.5x or 2x notional means for sequence-of-returns risk.
3. Cockroach Portfolio
Author: Mutiny Fund (Jason Buck, Taylor Pearson). Type: fixed allocation. Rebalance: quarterly. Backtest: 1986 to 2026 (40 years).
The Cockroach Portfolio takes the idea of "survives anything" to its logical conclusion: equal weights, five asset classes, no opinion about what is going to happen.
- 20% global equities
- 20% long Treasuries
- 20% gold
- 20% managed futures
- 20% short Treasuries (cash equivalent)
This is the portfolio that Mutiny Fund pitched as "the cockroach": ugly, slow, but you cannot kill it. The 1.10 Sharpe and -20.9% max drawdown over 40 years are the empirical version of "ugly but unkillable". This is also one of the few strategies in the catalog with a 40-year live-or-near-live record (gold, equities, bonds, T-bills all have deep history; managed futures is the only synthetic component).
What the Cockroach gives up is the upside. The 10.38% CAGR is the lowest in this batch, only marginally above the S&P 500's number over the same window. But it gets there with about a third of the index's max drawdown. In sequence-of-returns terms (which matter most for retirees), the Cockroach's long stretches of low single-digit losses translate to a much higher safe withdrawal rate than its CAGR suggests.
Who this fits. Capital preservation, retirees, anyone for whom a bad year matters more than a great year. Also: anyone who explicitly believes the next 30 years will not look like the last 30 (CAPE-justified pessimism, demographic transitions, geopolitical regime change). The Cockroach is the closest thing in the BestFolio catalog to a "this works in any future I can imagine" allocation.
4. Diversified Dual Momentum
Author: Gary Antonacci. Type: tactical. Rebalance: monthly. Backtest: 1990 to 2026 (35 years).
Antonacci's Dual Momentum Investing (2014) is one of the most cited books in the modern TAA canon. The single-strategy version, called GEM and already on BestFolio, rotates monthly between US equities, international equities, and bonds based on which has the best 12-month return.
Diversified Dual Momentum is the multi-asset extension. Instead of a single binary equity-or-bonds bet, it runs four separate dual-momentum modules (US equities, international equities, REITs, credit), each of which decides independently whether to hold its risk asset or rotate to bonds. The portfolio is the equal-weighted aggregate of those four modules.
Backtest (1990-10 to 2026-05, 35 years):
- CAGR: 7.52%
- Sharpe: 0.90
- Max drawdown: -22.1%
Two things about these numbers. First, 7.52% looks low compared to other tactical peers. The reason is structural: by holding REITs and credit in the universe, DDM captures returns that are typically less explosive than US equities. The flip side is the -22% max drawdown, which is materially better than most single-asset momentum strategies.
Second, this is one of the few strategies in the catalog where the diversification penalty is visible in the long-run CAGR. You give up some return in exchange for smoother behavior across regimes. Whether that trade is worth it depends entirely on how you intend to use the strategy. As a 100% allocation, it is unimpressive. As a 20% sleeve in a blended portfolio, it is pulling its weight by being on a different schedule than the equity-heavy peers.
Who this fits. Investors who already run trend-following strategies and want a less-correlated, more diversified version of dual momentum. Also: a useful "second momentum vote" if you already run GEM or HAA, because DDM signals will sometimes disagree with theirs in interesting ways.
5. KDA (Kipnis Defensive Adaptive)
Author: Ilya Kipnis. Type: tactical. Rebalance: monthly. Backtest: 1992 to 2026 (33 years).
KDA is one of the most-loved tactical strategies in the broader TAA community, and the closest thing on BestFolio to a "best of breed" tactical defense system. It combines the canary-trigger idea (borrowed from Wouter Keller's PAA and BAA) with momentum-weighted asset selection.
Mechanics:
- Each month, score the 14-asset universe (10 risk + 4 defensive) on a 13612 momentum signal (a weighted blend of 1-, 3-, 6-, and 12-month returns).
- Check the canary: if any of TIP, BIL, IEF is below its 12-month moving average, switch fully to defense (long Treasuries).
- Otherwise, hold the top N risk assets equal-weighted (Top 4 or Top 6 variants on BestFolio).
Backtest (1992-11 to 2026-05, 33 years):
- KDA Top 4: CAGR 8.44%, Sharpe 0.89, MaxDD -27.3%
- KDA Top 6: CAGR 7.09%, Sharpe 0.89, MaxDD -25.1%
The Top 4 variant is the higher-octane one (more concentration, more volatility). The Top 6 is the smoother default. Both have the same Sharpe in our backtest, which is a good signal that the difference is mostly cosmetic over a long enough window.
What makes KDA distinctive in the broader TAA family is the canary mechanism. Most momentum strategies rotate continuously based on signal strength; they get whipsawed in fast 2018-style corrections that recover before the strategy notices. KDA's binary canary check means that when the bond market signals stress (TIP, BIL, or IEF rolling over), the whole portfolio jumps to safe Treasuries instantly. That single rule cut KDA's 2008 drawdown to roughly half of GEM's, and it dampened the 2022 cross-asset selloff better than most of its peers.
Who this fits. Tactical investors who want momentum exposure but have been burned by whipsaws. KDA's canary is the most aggressive defensive trigger in the BestFolio catalog short of explicit regime detection.
How they complement each other
Five strategies that work in different regimes are valuable only if their misses are uncorrelated. Here is the regime fit of each release, classified by the type of failure they best survive:
| Strategy | Best regime | Worst regime | Crisis behavior |
|---|---|---|---|
| Return Stacked Quartet | Steady growth + falling rates | Sustained inflation with rising real rates | Cushioned (4 streams, 30% bonds) |
| 4-3-2-1 Dragon | Any single-axis regime | Coordinated stocks + bonds + gold sell-off | Strong (30% MF carries the load) |
| Cockroach | Tail-risk events | Long secular bull market | Strong (lowest correlation to anything) |
| Diversified DM | Persistent trends across multiple asset classes | Choppy whipsaw years (2015, 2018) | Strong if trend is clear, weak otherwise |
| KDA | Sustained equity bull with canary intact | V-shaped recoveries (false canary triggers) | Strong (canary forces all-in defense) |
Two of the five (Return Stacked Quartet and Dragon) bet on diversification across asset classes. Two more (DDM and KDA) bet on diversification across time: trend-following moves capital out of risk assets in falling markets, then back in when the trend reverses. Cockroach is the static, opinion-free baseline. The five together cover most of the decision space.
A worked blend: how five strategies turn into one portfolio
If you ran all five at equal weight (20% each), the resulting allocation on the morning of May 2, 2026 would look roughly like this:
| Asset | Approx. weight | Contributing strategies |
|---|---|---|
| US large-cap equity | ~22% | Quartet, Dragon, KDA |
| Long Treasuries | ~16% | Quartet, Dragon, Cockroach |
| Gold | ~10% | Dragon, Cockroach, GDE inside Quartet |
| Managed futures | ~14% | Quartet, Dragon, Cockroach |
| International equities | ~8% | DDM, KDA |
| REITs / credit / SCV | ~6% | DDM, Dragon |
| Cash / short Treasuries | ~10% | Cockroach |
| Tactical-driven other | ~14% | DDM, KDA monthly rotations |
Roughly a quarter is US equity exposure (one of the lowest equity weights you can run while still capturing the equity risk premium), with the rest distributed across bonds, gold, managed futures, and tactical defenses. This is the kind of allocation that institutional risk-parity desks have been running for years; the 5-strategy blend approximates it via products you can buy in any retail brokerage.
The Pro version of BestFolio's Blend tool will run the full backtest of any combination you build. We will not put a fabricated headline number here. Open the tool, pick your weights, see what you get.
What we left out
Three caveats so the picture is honest:
Synthetic data risk. Every strategy in this batch has at least some synthetic backtest history. RSST has 2.5 years live; KMLM has 5; ZROZ has 16. Long backtests are reconstructed from underlying components with cost assumptions that are reasonable but not perfect. The synthetic period should bracket the live period; the live period is too short to verify that.
Costs are real but not fully modeled. Capital-efficient ETFs have an implicit financing cost (you are effectively borrowing at the broker's repo rate to fund the futures overlay). Leveraged ETFs (TMF, UPRO, UGL) have decay from daily reset. Tactical strategies have transaction costs and slippage. None of these are explicitly modeled in our backtests beyond expense ratios. In a high-rate environment (2024 to 2026), the financing drag on the capital-efficient sleeves is likely 1% to 2% per year above expense ratio. Adjust your expectations downward accordingly.
Past behavior is not the same as future behavior. The past 40 years included one of the longest disinflation-and-falling-rate cycles in recorded history. Long Treasuries (ZROZ, TLT) were the best-performing single asset over much of that window. If we are in a new regime where rates stay higher for longer, the Quartet, Dragon, and Cockroach all lean meaningfully on a long-duration sleeve that may not work the same way. The trend-following sleeves (RSST, KMLM, DDM, KDA) are partial protection against this; the 100% buy-and-hold mixes are not.
How to actually use these
Three practical paths, depending on how active you want to be:
- Pick one. If you can only run a single strategy, pick the one whose worldview you actually believe. Cockroach for "I want to survive anything", Dragon Standard for "I want all-weather but smoother", Quartet for "I want growth-oriented diversification", KDA or DDM if you are willing to commit to monthly tactical decisions.
- Pick two. Pair one fixed allocation (Quartet, Dragon, or Cockroach) with one tactical (KDA or DDM). The tactical does the regime detection; the fixed provides the steady carry.
- Run all five. Use the BestFolio Blend tool to define a 5-way portfolio and let the platform aggregate the monthly signals into a single rebalance recommendation.
All five strategies are visible to free users on the strategies page. Backtest details, current allocations, and signal alerts require a Pro subscription. The Blend tool and full multi-strategy backtests are Pro features.
What's next
June will continue the diversification theme with two more BestFolio Originals plus a third community classic. We will write up the empirical case for "five over one" with full multi-strategy walk-forward results, including how the blends would have rebalanced across the 2008 and 2020 crises.
Until then, the five May releases are live now. The Sharpe-optimization sweep that produced the Return Stacked Quartet's 20/20/30/30 weights is a good place to start if you want to see how we pick the parameters we ship.
Strategy backtest details accurate as of 2026-05-01. Past performance is not indicative of future results. Not investment advice; for educational purposes only.