It is the sort of book where the system itself could be described in a chapter, but for anyone interested in momentum investing or long term trend following there is much interesting behavioural and economic learning contained here.
He also warns against curve fitting, which gives the book a good deal of credibility I suspect there is a danger that the overall system may not be quite as profitable as in the past because of the long term bull market in bonds we have seen in the past 20 years, but if there was a problem with bonds, one could simply go into cash instead.
Highly recommended and good value too.
A clear and elegant approach to maximizing returns and miniming drawdowns What I really like about this book is how it gives me a way to overcome behaviours that I know have hampered my investing success in the past, as well as a way to stop second guessing and compulsive stock checking It s pretty much set it and forget it, with a once monthly signal check to see if you need to trade among the three assets used in the system Gary was also very helpful in answering any questions I had before implementing the strategy.
I have been following Gary s work for almost 3 years now while researching several trading systems He has been very helpful responding to all my questions and I ve learned a great deal from him over It was especially nice to read about Gary s interesting finance career in this book His network, experience education made him the right person to discuss the wide range of topics history he covered.
As the name suggests, this book is about Momentum Investing the idea that markets with strong relative strength continue outperforming in the short term while weak markets continue to underperform The author makes a very compelling case for why momentum is the premier anomaly for outperforming the broad market indices.
He does this with a logical flow of ideas that are backed with a great deal of research every step along the way The book starts by building a foundation with history and finance concepts, then explores all the various funds and alternative strategies out there before discussing what momentum is in detail By looking at the alternatives, the reader appreciates why momentum stands out.
The author has an excellent writing style Finance books can get very dull, but Gary s humor and storytelling made the book enjoyable to read Here is a summary of what I took from this book In Chapter 1, Gary acknowledges that indexing beats the average investor since it is diversified, disciplined and lower cost This helps supports the idea that markets are efficient However, while it s hard to beat indexing it s not impossible You just need a systematic approach to remove your emotions that s been thoroughly tested and minimizes costs Chapter 2 shows this with a historical tour of traders that successfully used momentum to generate excess return for over a century.
Chapters 3 4 discussed concepts from Modern Finance in detail, which can be tough to follow if you don t have a finance background I really enjoyed the discussion of Behavorial Finance in chapter 4 Investors emotions cause them to buy and sell at the wrong times and are largely what cause markets to be inefficient Anomalies like momentum should persist as long as humans have emotions.
Chapters 5 6 discussed the investment landscape It was shown that stocks have been the best performing asset class especially US equities followed by bonds Gary then discussed other vehicles such as mutual funds, hedge funds and alternative strategies such as smart beta It was shown how these vehicles have on average underperformed market indices The number of vehicles and strategies out there today is mind blowing These 2 chapters can save readers years of frustration.
Chapters 8 10 discussed the Dual Momentum strategy Gary explained in detail what absolute vs relative momentum is, how using both enhances his strategy and all the variations to his method that he explored Backtest results for all permutations were presented in clear, organized tables charts.
In closing, this book presents a compelling case for trading the markets using the momentum anomaly The benefits of this strategy include 17% CAGR with a 0.
9 Sharpe Ratio over last 40 years Robust in all market environments Persistent over long run excess returns since 1800s Easy to implement requires little time Systematic eliminating human emotions Very low portfolio turnover fees Unlike the majority of other reviewers here, I am actually using Dual Momentum Investing DMI , and have been for nearly three years now I use it to manage virtually my entire investment portfolio pension and non pension Having relied in the past on stockbrokers, financial advisors and pension funds, I have found the experience of taking personal control and applying DMI to be transformative and I only wish that I had been able to do this a decade or earlier It is a simple system that anyone can follow Although it is written for the US investor, it can be applied by the UK investor to similar effect Gary s accompanying blog provides insights into how this can be done As with any investment system, the emotions generated by gains and losses can get in the way, and this has been my only difficulty but I have full confidence as never before that over a 5 year investment horizon, DMI will drive very healthy growth in my portfolio as it has done so far I am extremely grateful to Gary for developing and sharing DMI and recommend it wholeheartedly to anyone wanting Higher Returns with Lower Risk , combined with ease of use.
The author quotes lots of academic studies to peddle his arguments that timing the market with the aim of being invested in the geographical region with the best trend, and of protecting yourself from large losses when the trend turns negative is better than being fully invested trough thick and thin Yet if you look at what actual practioners say I mean people making real money, not writing academic papers about it the story is quite different Peter Lynch Far money has been lost by investors preparing for corrections than has been lost in corrections themselves.
Charlie Munger The value of my partnership went down 50% it s a mark of manhood You better be able to handle it without much fussing and if you re not willing to react with equanimity to a market price decline of 50% two or three times a century you re not fit to be a common shareholder and you deserve the mediocre result you re going to get.
Munger btw has also noted that a famous academic and Noble prize winner was having his money managed by him and Buffett, whilst writing papers and lecturing about the stock marketI rest my case.
This is one of the best books on TA out there, there is a lot of miss conception on TA, some think it is akin to reading tea leaves, some swear by it.
Pick this book up which ever camp you are on, it is well grounded in scientific methodology, on par with some peer reviewed articles I read The literature on TA has not changed much for the past decade or so, and certainly hasn t kept up since the advent of electronic trading and HFT This is a refreshing book
I am just your average joe investor Several years back after learning about the poor track record of the vast majority of mutual fund managers, I decided to educate myself on investing so that I could be in charge of my own financial future If I had known then what a confusing, difficult, stressful, emotional up and down journey it was going to be, I m not sure that I ever would have ventured down this path And yet, there was just something in me that kept me trudging forward For some reason there was just no turning back for me.
Throughout these past several years, I ve read a LOTbooks, websites, videos, anything I could get my hands on I had no idea it was going to be this difficult to make a decent return on my money And I had no idea how large a part my emotions and beliefs would affect my level of success One of the biggest things I ve come to terms with is that I need some sort of simple, straight forward method that can be easily implemented with very little discretion on my part The discretionary the model, the difficult it has proven for me to follow through EnterDual Momentum Investing.
The biggest thing that excited me about this book is that it actually describes in detail how to implement the model I can t tell you how many investing books I have read where authors only describe generalities in creating investment models They make suggestions or review historical methods used by successful traders Its become a bit of a pet peeve of mine that so many of them are interested in protecting their proprietary systems that they contribute little value to the books they are writing I have no problem with them wanting to keep their methods private, but then don t publish a book and not share the secret sauce with your readers Well, I can only say how much I appreciate that this author discloses the how to of this model After reading this book, I am left with no doubt as to how this model has performed throughout a long history He gives a thorough explanation of the model and simple detailed instructions for implementation I am not left wondering if the model will work for me, nor am I left in a place where I have to figure out how to backtest this thing Like I said, I m just an ordinary investor not a programmer.
I have to applaud the author for getting this research from the scientific community and into the hands of the general public As with most things, it generally takes quite a long time for the trickle down effect to actually take place and hit the masses Even though trend following has been around for decades, I am pleased to be one of the earlier adopters of this trend following model that has yet to receive the attention it deserves.
My only critique of the book would be this while I found all of the scientific methodology to be impressive and informative, it was also difficult at times for me to trudge through But I am so glad that I did For those of us with little experience or education in statistical analysis, it would be great to have a chapter that summarizes all the findings in simple language If we want to read the nitty gritty, we can always look back at the appropriate studies Perhaps this could be incorporated in a future edition.
In summary, I feel like my search is over I have finally found a method that I can have complete confidence in because it has already been scientifically tested, and also because I know that I won t have any difficulty in implementing it Its a system that will provide me with long term growth, that suits my lifestyle, and will grant me the freedom to read something other than investing books In essence, I feel like I am going to sleep a lot better and, in a way, I have my life back P.
S I wrote this author with a couple of questions and am pleased to report that he took the time to respond to me.
In 30yrs of reading these types of books Gary s is one of the best I have read Very informative, certainly resonated with what I ve seen in the markets over the years and helpfully written in simple practitioner language Highly recommended Tony