We wanted to take a moment to highlight two must read posts from Newfound Research. Newfound is a thought leader in the TAA space and we highly recommend following them now.
Newfound outlines three ways in which TAA investors often fail to diversify:
- WHAT they trade: failing to diversify across assets (the usual definition of diversification)
- HOW they trade: failing to diversify across methods
- WHEN they trade: failing to diversify across execution days to minimize timing luck
We are not affiliated with Newfound, but you wouldn’t know it from reading those posts. This trifecta of diversification is a core problem that Allocate Smartly was designed to solve (here’s another one).
We track more than 40 published TAA strategies in near real-time, which members can combine into their own custom portfolios:
- Almost all of these strategies provide some degree of asset diversification on their own, and that asset diversification is multiplied as more and more strategies are combined together. That’s diversification of the “what”.
- These strategies differ in how they approach trading. Momentum and/or trend-following are common themes among the strategies that we track, but the process each uses to accomplish that are often very different. That’s diversification of the “how”.
- Most of these strategies only trade once per month to limit noise and unnecessary turnover. We provide the ability to instead trade each strategy on other days of the month, or spread trades out across the entire month (i.e. portfolio tranching). That’s diversification of the “when”.
Obviously, we couldn’t agree more with Newfound’s message. We built a site around it.