The 12% Solution (Carter)
TacticalPromoderateBased on research by David Alan Carter · Carter, D.A. The 12% Solution.
This is BestFolio's independent implementation. Not affiliated with or endorsed by the original author.
Launched Jan 1, 2017About this Strategy
Two-sleeve monthly rotation: 60% in the best-momentum equity ETF (or cash if none outperforms) and 40% in the stronger bond ETF. Uses 3-month return lookback across US large, mid, small cap, and Nasdaq.
The complete strategy logic, asset universe, and rebalancing rules are available to Pro subscribers. This includes the full methodology description, author notes, and implementation details.
Pro subscribers also get access to current signals, full backtest history, and the ability to blend this strategy into custom portfolios.
Strategy Rules
Pro subscribers only
- 1Calculate 3-month total return for all 7 ETFs
- 2Equity sleeve (60%): best 3-month return from {SPY, QQQ, IWM, MDY, SHY}
- 3Bond sleeve (40%): best 3-month return from {TLT, JNK}
- 4Allocate 60% to equity winner and 40% to bond winner
Key Differentiators
Research Source
Based on research by David Alan Carter
Carter, D.A. The 12% Solution.
Strategy Info
- Type
- Tactical (TAA)
- Frequency
- monthly
- Next Rebalance
- Jun 109:30 ET (10d)
- Variants
- 1
- Risk Category
- moderate
- Tags
- momentum
- Type
- Tactical Asset Allocation (TAA)
- Trading Frequency
- Monthly (last trading day)
- Equity Sleeve
- 60% — best of SPY, QQQ, IWM, MDY, or SHY (cash)
- Bond Sleeve
- 40% — best of TLT or JNK
- Momentum Lookback
- 3 months (total return)
- Risk Off Trigger
- SHY winning the equity sleeve
- Data Source
- Institutional-grade market data (4 months minimum history)
Asset Classes
The 12% Solution (Carter) at a glance
The 12% Solution (Carter) is a tactical asset allocation (TAA) strategy by David Alan Carter across US Equity (Large Cap), US Equity (Mid Cap), US Equity (Small Cap), High Yield Bonds, rebalanced monthly. Backtested 1985-05-31 to 2026-05-20 (41.0 years): 10.9% CAGR, 0.93 Sharpe, -31.8% max drawdown, 11.9% volatility.
- Type
- Tactical (TAA)
- Author
- David Alan Carter
- Rebalancing
- Monthly
- Risk
- Moderate
- Period
- 1985-05-31 to 2026-05-20
- CAGR
- 10.9%
- Sharpe
- 0.93
- Max Drawdown
- -31.8%
- Volatility
- 11.9%
The 12% Solution (Carter) — Tactical Asset Allocation Strategy
The 12% Solution is a monthly rotation strategy from David Alan Carter's book. It splits the portfolio into a 60% equity sleeve and a 40% bond sleeve, using 3-month momentum to select the best asset within each. The equity sleeve chooses from SPY, QQQ, IWM, MDY, and SHY (cash proxy). If SHY wins, the equity sleeve goes to cash — this is the risk-off mechanism. The bond sleeve picks between TLT and JNK.
Backtest Performance (1985-05-31 to 2026-05-20)
| Metric | The 12% Solution (Carter) |
|---|---|
| Compound Annual Growth Rate (CAGR) | 10.9% |
| Maximum Drawdown | -31.8% |
| Sharpe Ratio | 0.93 |
| Sortino Ratio | 1.16 |
| Annualized Volatility | 11.9% |
| Calmar Ratio | 0.34 |
| Total Return | 6885.0% |
| Backtest Period | 41.0 years |
Strategy Details
- Type
- Tactical (TAA)
- Rebalancing
- monthly
- Risk Level
- moderate
- Variants
- 1
- Author
- David Alan Carter
- Source
- Carter, D.A. The 12% Solution.
Asset Classes
- US Equity (Large Cap)
- US Equity (Mid Cap)
- US Equity (Small Cap)
- High Yield Bonds
- Long-Term Treasuries
- Short-Term Treasuries
Categories
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