Flirting with Models

The Research Library of Newfound Research

Month: May 2018

Dollar-Cost Averaging: Improved by Trend?

Many investors often ask whether they are better off dollar-cost averaging or lump-sum investing; we find that trend following may be a happy medium.

Separating Ingredients and Recipe in Factor Investing

Factor portfolio construction has two key elements: ingredients (the signals used to pick investments) and recipe (the rules used to translate those signals into allocations). While the ingredients often get the most focus, the recipe can have just as large of an impact on returns.

How to Benchmark Trend-Following

Benchmarking a trend-following strategy is difficult. The tendency is to compare it to an equity strategy, but this often leads to disappointment. We explore a better benchmark that allows investors to accurately measure performance and set expectations.

Leverage and Trend Following

We typically explore trend following as a risk management technique for investors sensitive to sequence risk, but it may also be a way to allow growth investors to benefit from leverage by reducing the risk of permanent portfolio impairment that would otherwise occur due to large drawdowns.
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