Composite Momentum
Check SPY vs 200-day SMA: if below then DEFENSIVE: 60% IEF + 40% GLD. Backtest max drawdown: -20.3%.
Strategy & methodology
Check SPY vs 200-day SMA: if below → DEFENSIVE: 60% IEF + 40% GLD; If above → Compute 8-month return for each asset, filter out negatives; If no positive-momentum assets remain → DEFENSIVE; Rank remaining assets by momentum, select top 4…
- Strategy type:
- Tactical asset allocation
- Rebalance frequency:
- Monthly
- Original publication:
- 2024; results after that are out-of-sample for the original research. All results are backtest simulations.
- Data through:
- Backtest data through 2026-10-01.
Simulated history
Stand-in funds and until when (7)
- VNQ: VGSIX before Sep 29, 2004
- TLT: VUSTX before Jul 26, 2002
- IEF: VFITX before Jul 26, 2002
- EFA: VGTSX before Aug 17, 2001
- VNQ: FRESX before Sep 29, 2004
- EFA: PRITX before Aug 17, 2001
- SPY: VFINX before Jan 29, 1993
Before these dates the backtest uses a stand-in, not the fund itself, so the results over those stretches show how the rules would have behaved, not what the fund returned.
Research data and disclosures
Check SPY vs 200-day SMA: if below then DEFENSIVE: 60% IEF + 40% GLD. Backtest max drawdown: -20.3%. This is a tactical asset allocation strategy. BestFolio supplies the public rule or approach and backtest context; current signals, allocations, and paid interactive data remain restricted to Pro access. Users review the published signal and place any resulting trades in their own brokerage. Displayed returns remain hypothetical and do not represent a customer's brokerage record. The facts above show how current the data is.
- BestFolio supplies
- The monthly signal email and this strategy page; current signals and email alerts require Pro access.
- Customer action
- Review the published signal and place any required trades in your own brokerage. BestFolio does not execute orders.
- Costs and exclusions
- Backtests are net of a modeled one-way transaction cost (10 bps, scaled up to 3x under stress); taxes, fund-expense drift, or market impact are not modeled. No tax, no slippage beyond the stated cost. Methodology limitations
Published result: Engine drift-until-flip-v1, data version a8e51e73, published 2026-10-01
Is Composite Momentum still working in 2026?
Composite Momentum returned 8.22% over the trailing 12 months and 61.06% over 36 months through 2026-10-01, compared with a full-backtest annualized return of 10.94%. Its full-backtest maximum drawdown was -20.32%. The full sample contains 10339 daily NAV observations from 1986-02-28. These are model results, not investor account returns or a promise. As of 2026-10-01 it is -2.96% below its high-water mark of 2026-01-29, 8 months ago, and its longest run below a previous high was 3.9 years. Recent returns do not establish that the strategy will keep working.
| Period | Return | CAGR | Max drawdown | Observations | Dates |
|---|---|---|---|---|---|
| Trailing 12 months | 8.22% | Not annualized | -8.60% | 252 | 2025-10-01 to 2026-10-01 |
| Trailing 36 months | 61.06% | Not annualized | -8.60% | 754 | 2023-09-29 to 2026-10-01 |
| Full backtest | 6664.51% | 10.94% | -20.32% | 10339 | 1986-02-28 to 2026-10-01 |
Last verified
Common questions about these results
Are these live investor returns?
No. These are the latest model NAV results from the published backtest. A recent date alone does not make a result an independently observed live record. Investor costs, taxes and execution can differ.
Why can a strategy lag for a year?
A tactical model can hold defensive assets during a rally or change positions during reversals. A short window can differ substantially from its full history. Compare cumulative returns over matching dates and inspect drawdowns as well.
How long has it spent below a previous high?
Its last high-water mark was 2026-01-29, 8 months before 2026-10-01, and it is -2.96% below that level now. The longest run below a previous high in the full backtest was 3.9 years. Recovering from a drawdown can take years, and a strong trailing return does not mean a past high has been regained.
Where can I check the signals behind these results?
The Signals tab on this page lists each dated model decision for the selected variant; for Pro strategies they are visible to Pro members. The methodology page explains the backtest assumptions.
Composite Momentum at a glance
Composite Momentum is a tactical asset allocation (TAA) strategy by BestFolio Research across US Equity, International Equity, Bonds, REITs, rebalanced monthly. Backtested 1986-02-28 to 2026-10-01 (40.6 years): 10.9% CAGR, 1.16 Sharpe, -20.3% max drawdown, 9.7% volatility.
- Type
- Tactical (TAA)
- Author
- BestFolio Research
- Rebalancing
- Monthly
- Risk
- Moderate
- Period
- 1986-02-28 to 2026-10-01
- CAGR
- 10.9%
- Sharpe
- 1.16
- Max Drawdown
- -20.3%
- Volatility
- 9.7%
Composite Momentum — Tactical Asset Allocation Strategy
Composite Momentum is a BestFolio original that synthesizes ideas from PAA, VAA, Dual Momentum, and EAA into a single system.
First, a macro trend filter checks whether SPY is above its 200-day SMA. If below, the portfolio shifts to 60% IEF + 40% GLD. When the trend is up, the strategy selects the top 4 assets (from an 8-asset universe) ranked by 8-month return, filtered by absolute momentum (negative returns excluded). Selected assets are weighted using inverse-volatility (3-month rolling).
Composite Momentum: frequently asked questions
- What is Composite Momentum?
- Trend-filtered multi-asset momentum rotation. Uses SPY 200-day SMA for regime detection, 8-month return for asset selection, absolute momentum filter, and inverse-volatility weighting. Risk-off: IEF/GLD. Cherry-picks ideas from PAA, VAA, Dual Momentum, and EAA.
- Who created the Composite Momentum strategy?
- Composite Momentum was developed by BestFolio Research. It is based on BestFolio Research (2024). Composite Momentum.
- What is the historical return and maximum drawdown of Composite Momentum?
- Backtested from 1986-02-28 to 2026-10-01, Composite Momentum returned 10.9% CAGR with a -20.3% maximum drawdown and a Sharpe ratio of 1.16. Past performance does not guarantee future results.
- How often is Composite Momentum rebalanced?
- Composite Momentum is rebalanced monthly. BestFolio publishes the updated allocation signal each period.
- Is Composite Momentum a tactical asset allocation strategy?
- Yes. Composite Momentum is a tactical asset allocation (TAA) strategy: it adjusts its holdings based on market signals each period rather than holding a fixed allocation.
Backtest Performance (1986-02-28 to 2026-10-01)
| Metric | Composite Momentum |
|---|---|
| CAGR | 10.9% |
| Max Drawdown | -20.3% |
| Sharpe | 1.16 |
| Sortino | 2.11 |
| Volatility | 9.7% |
| Calmar | 0.54 |
| Total Return | 6664.5% |
| Backtest Period | 40.6 years |
Every rebalance fills at the signal-day close, net of modeled transaction costs. Followers trade at the next open; the delayed-close line in the Rebalance Frequency Sensitivity card shows the effect of trading one session later. Execution assumption
Strategy Details
- Type
- Tactical (TAA)
- Rebalancing
- monthly
- Risk Level
- moderate
- Variants
- 3
- Author
- BestFolio Research
- Source
- BestFolio Research (2024). Composite Momentum
Asset Classes
- US Equity
- International Equity
- Bonds
- REITs
- Gold
- Commodities
Categories
Further reading
New to this approach? Read what tactical asset allocation is and how it works.
Holding Composite Momentum alongside another strategy? Use the free portfolio overlap calculator to see how much of the two portfolios actually differs.
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