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 2026-07-03 (40.3 years): 11.3% CAGR, 1.21 Sharpe, -20.4% max drawdown, 9.7% volatility.
- Type
- Tactical (TAA)
- Author
- BestFolio Research
- Rebalancing
- Monthly
- Risk
- Moderate
- Period
- 1986-02-28 to 2026-07-03
- CAGR
- 11.3%
- Sharpe
- 1.21
- Max Drawdown
- -20.4%
- 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 2026-07-03, Composite Momentum returned 11.3% CAGR with a -20.4% maximum drawdown and a Sharpe ratio of 1.21. 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 2026-07-03)
| Metric | Composite Momentum |
|---|---|
| Compound Annual Growth Rate (CAGR) | 11.3% |
| Maximum Drawdown | -20.4% |
| Sharpe Ratio | 1.21 |
| Sortino Ratio | 2.12 |
| Annualized Volatility | 9.7% |
| Calmar Ratio | 0.56 |
| Total Return | 7528.5% |
| Backtest Period | 40.3 years |
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.
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