The Kahneman-Tversky (K-T) Portfolio is a simple Dual Momentum portfolio that is split into a “slow” (Kahneman) portion and a “fast” (Tversky) portion based on long (252-day) and short (100- and 60-day) lookback periods for measuring momentum.
Performance of the portfolio over the past 15 months looks like this:
and is lagging the benchmark AOR Fund due to the use of TSLOs through 2021. I am presently not using TSLOs with this portfolio.
The Kahneman portion of the portfolio is currently holding shares in VTI (US Equities) and the Tversky portion is holding shares in VEU (International Equities). Both portions of the portfolio saw a significant recovery through March after suffering significant draw-downs in January and February.
If we check current rankings and recommendations for the Kahneman portion of the portfolio we see the following:
with a Buy recommendation to continue to hold VTI.
Looking at rotation graphs:
we see the turn-around in both long- and short-term momentum over the past 3 weeks with VTI showing the strongest long-term strength and VEU slightly stronger short-term strength. There is no obvious reason to make any adjustments to this portion of the portfolio at this point in time.
Moving to the faster reacting Tversky portion:
we also see a recommendation to Buy VTI and this is supported by the rotation graphs:
that again show a sharp reversal over the past 2 weeks. Interestingly the benchmark AOR fund is showing the most strength relative to the reference TLT (Bond) fund. Even though AOR is not usually considered as a possible holding for this portfolio there is a strong temptation (and justification) to move from VEU to AOR. However, I will stick to the basic system and move to VTI as recommended in the Kipling rankings (that excludes AOR).
Making this adjustment:
we see ~11% risk with no restraints. Less aggressive investors might consider cutting the holding to 45 shares or placing a TSLO order to keep risk at 8%.
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