Using Time-Series Momentum to Intentionally Miss the Best Months. Yes, Really.

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The buy-and-hold crowd, including many mutual fund companies and a large cross-section of vocal pundits, like to talk about how missing the N best days/months in the market causes a serious impairment to long-term investor returns.

We beg to differ:

What they fail to mention is that, because stock market volatility clusters during periods of market crisis, the best daily and monthly stock market returns are directly adjacent in time to the worst monthly returns. In fact, investors would be considerably better off missing both the best and worst days/months in the market. These investors would realize the same gains as buy-and-hold investors, but with much less grief in the form of volatility and drawdowns.  Simple trend-following strategies work for precisely this reason…read more at InvestReSolve.com/blog.