Philosophy

Dynamic Asset Allocation provides the foundation for the investment philosophy practiced at Beat The Dow. It is diametrically opposed to Static Asset Allocation, the philosophy advocated by large financial institutions for their own benefit.

Dynamic Asset Alocation employs timing signals to determine when to invest. If you are not familiar with the use of market timing signals, please scan these articles:
Friends Don’t Let Friends Buy And Hold
Can You Afford Not to Time the Market?
Using Market Timing Signals with an Index

Dynamic Asset Allocation uses relative strength momentum to determine what to buy and sell. An equity's relative strength momentum is determined by dividing a Fast Exponential Moving Average of its price by a Slow Exponential Moving Average of its price. In graphical terms, the higher the momentum, the greater the relative distance between the curves of the faster and slower average.

Momentum is calculated for a given fund based solely on its own price history without regard to the value of any other fund or index. Once absolute values are computed for all the equities in a group such as Single Country ETF's, those equities may be ranked. Momentum ranking thus highlights equities whose past few days' performances have had the strongest (positive or negative) effect on their performances over the past few weeks. In most cases, we use 6 market days for computing the fast moving average and 24 market days for computing the slow moving average.

Timing signals and momentum calculations are incorporated in computer-decision-driven trading systems called Model Portfolios.

Click here to view a 16-slide PowerPoint presentation covering Dynamic Asset Allocation and Model Portfolio Development.