Faber's 12-Month High Switch
For each of 5 assets: check if current price is at least 95% of its 12-month high. Passing assets get 20% allocation each. Backtest max drawdown: -12.9%.
Strategy & methodology
For each of 5 assets: check if current price >= 95% of its 12-month high; Passing assets get 20% allocation each; Unallocated portion: Dynamic Bond test on IEF; If IEF passes → allocate remainder to IEF; else → BIL (cash).
- Strategy type:
- Tactical asset allocation
- Rebalance frequency:
- Monthly
- Original publication:
- 2019-11-04; results after that are out-of-sample for the original research. All results are backtest simulations.
- Data through:
- Backtest data through 2026-10-22.
Simulated history
Stand-in funds and until when (6)
- PDBC: DBC before Nov 7, 2014
- VNQ: VGSIX before Sep 29, 2004
- IEF: VFITX before Jul 26, 2002
- EFA: VGTSX before Aug 17, 2001
- VNQ: FRESX before Sep 29, 2004
- 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
For each of 5 assets: check if current price is at least 95% of its 12-month high. Passing assets get 20% allocation each. Backtest max drawdown: -12.9%. 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 19162b6e, published 2026-10-17
Is Faber's 12-Month High Switch still working in 2026?
Faber's 12-Month High Switch returned 8.55% over the trailing 12 months and 43.31% over 36 months through 2026-10-22, compared with a full-backtest annualized return of 8.84%. Its full-backtest maximum drawdown was -12.86%. The full sample contains 10652 daily NAV observations from 1985-01-01. These are model results, not investor account returns or a promise. As of 2026-10-22 it is -4.00% below its high-water mark of 2026-03-02, 8 months ago, and its longest run below a previous high was 2.3 years. Recent returns do not establish that the strategy will keep working.
| Period | Return | CAGR | Max drawdown | Observations | Dates |
|---|---|---|---|---|---|
| Trailing 12 months | 8.55% | Not annualized | -5.75% | 252 | 2025-10-22 to 2026-10-22 |
| Trailing 36 months | 43.31% | Not annualized | -6.16% | 754 | 2023-10-20 to 2026-10-22 |
| Full backtest | 3350.18% | 8.84% | -12.86% | 10652 | 1985-01-01 to 2026-10-22 |
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 2026-03-02, 8 months before 2026-10-22, and it is -4.00% below that level now. The longest run below a previous high in the full backtest was 2.3 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.
Faber's 12-Month High Switch at a glance
Faber's 12-Month High Switch is a tactical asset allocation (TAA) strategy by Meb Faber across US Equity, International Equity, REITs, Gold, rebalanced monthly. Backtested 1985-01-01 to 2026-10-22 (41.8 years): 8.8% CAGR, 0.77 Sharpe, -12.9% max drawdown, 7.3% volatility.
- Type
- Tactical (TAA)
- Author
- Meb Faber
- Rebalancing
- Monthly
- Period
- 1985-01-01 to 2026-10-22
- CAGR
- 8.8%
- Sharpe
- 0.77
- Max Drawdown
- -12.9%
- Volatility
- 7.3%
Faber's 12-Month High Switch — Tactical Asset Allocation Strategy
Meb Faber's 12-Month High Switch checks whether each of 5 risky assets (SPY, EFA, VNQ, GLD, PDBC) is trading within 5% of its 12-month high. Assets that pass are held at 20% each; the remainder goes to bonds. The Dynamic Bond variant applies the same test to IEF: if IEF also fails, the defensive allocation shifts to cash (BIL) instead, protecting against simultaneous stock/bond declines.
Faber's 12-Month High Switch: frequently asked questions
- What is Faber's 12-Month High Switch?
- Hold risky assets within 5% of their 12-month high; shift remainder to bonds or cash (Dynamic Bond).
- Who created the Faber's 12-Month High Switch strategy?
- Faber's 12-Month High Switch was developed by Meb Faber. It is based on Faber, M. (2006). A Quantitative Approach to Tactical Asset Allocation. Dynamic Bond variant per major TAA trackers..
- What is the historical return and maximum drawdown of Faber's 12-Month High Switch?
- Backtested from 1985-01-01 to 2026-10-22, Faber's 12-Month High Switch returned 8.8% CAGR with a -12.9% maximum drawdown and a Sharpe ratio of 0.77. Past performance does not guarantee future results.
- How often is Faber's 12-Month High Switch rebalanced?
- Faber's 12-Month High Switch is rebalanced monthly. BestFolio publishes the updated allocation signal each period.
- Is Faber's 12-Month High Switch a tactical asset allocation strategy?
- Yes. Faber's 12-Month High Switch 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 (1985-01-01 to 2026-10-22)
| Metric | Faber's 12-Month High Switch |
|---|---|
| CAGR | 8.8% |
| Max Drawdown | -12.9% |
| Sharpe | 0.77 |
| Sortino | 1.30 |
| Volatility | 7.3% |
| Calmar | 0.69 |
| Total Return | 3354.9% |
| Backtest Period | 41.8 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
- Variants
- 2
- Author
- Meb Faber
- Source
- Faber, M. (2006). A Quantitative Approach to Tactical Asset Allocation. Dynamic Bond variant per major TAA trackers.
Asset Classes
- US Equity
- International Equity
- REITs
- Gold
- Commodities
- Treasuries
- T-Bills
Further reading
New to this approach? Read what tactical asset allocation is and how it works.
Holding Faber's 12-Month High Switch alongside another strategy? Use the free portfolio overlap calculator to see how much of the two portfolios actually differs.
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