Subject: Why Investors Underperform and How Not To
Antonacci, of Optimal Momentum, just posted a new article which related to Mechanical Investing

Why Investors Underperform and How Not To
https://www.optimalmomentum.co...

Some highlights:
Here are some systematic approaches that have over 100 years of academic validation and long-term, real-time success:
Absolute momentum (rate of change) – here, here, and here
Simple moving average crossovers – here
Exponential moving average trend – here
Channel breakouts – here and here
Charting patterns – here
Dow theory – here and here
Relative strength – here, here, here, and here
Seasonality – here
Mean reversion – here, here, and here
Each "here" is a link to a published paper or book.

Another benefit of systematic rules-based approaches is that they can keep you from being swayed by your emotions. Unfortunately, not everyone who uses such models strictly follows them.


Most investors do not ... react well when their portfolios are down 50% or more. So, they try to mitigate downside risk exposure
Investors using bonds and other alternatives sacrifice terminal wealth for a minor reduction in portfolio volatility.
This brings to mind the current "twice the Nasda100 CAGR with simple criteria" thread, with it's large CAGR and also very HUGE drawdowns.



Markets often show a loss of momentum before they drop sharply. Trend-based approaches can then exit before much harm is done.
In accordance with what various people have said, "tops are rounded and take many months before the plunge" & "true bear markets drop slowly at first, quick sharp drops are just volatility and recover quickly". As we saw in April.