Test Market Timing Models

This tool allows you to test different market timing and tactical asset allocation models based on moving averages, momentum, market valuation and target volatility. The supported models include:

You can find a summary of the selected tactical asset allocation model below, and a more detailed description in the FAQ section.

Shiller PE Ratio Market Valuation

Shiller PE Ratio (PE10) market valuation based timing model adjusts the allocation between stocks and bonds as follows:
  • PE10 >= 22 - 40% stocks, 60% bonds
  • 14 <= PE10 < 22 - 60% stocks, 40% bonds
  • PE10 < 14 - 80% stocks, 20% bonds
The balanced 60% stock and 40% bond allocation is used as the benchmark portfolio.

Moving Averages - Single Asset

The moving average timing model is either invested in a a specific stock, ETF or mutual fund, or is alternatively in cash or other risk-free asset based on the moving average signal. The model is invested in the asset when the adjusted close price is greater than the moving average and the model moves to cash when the adjusted close price is less than the moving average. The model also supports using moving average cross-over as the signal.

Moving Averages - Portfolio Assets

The moving average model applies the moving average signal to each portfolio asset. The model is invested in a portfolio asset when the adjusted close price is greater than the moving average and the allocation is moved to cash when the adjusted close price is less than the moving average. The model also supports using moving average cross-over as the signal.

Momentum - Relative Strength

The relative strength momentum model invests in the best performing assets in the model based on each asset's past return. The momentum can be based on a single timing period, or multiple weighted timing periods. Additionally the model supports using moving averages as a risk control to decide whether investments should be moved to cash.

Momentum - Dual Momentum

The dual momentum model uses relative momentum to select the best performing model assets and incorporates absolute momentum as a filter to invest in cash if the excess return of the selected asset over cash is negative.

Adaptive Allocation

The adaptive asset allocation model combines relative strength momentum model with different asset weighting. The relative strength model uses an equal weight allocation for the model selected assets, whereas the adaptive asset allocation uses either risk parity allocation or minimum variance allocation for the model assets to minimize the expected volatility.

Target Volatility

The target volatility model adjusts the market exposure of the portfolio based on the realized historic volatility and the given volatility target. The cash allocation in the portfolio is increased or decreased as required to meet the targeted volatility level in order to improve the risk adjusted performance.
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Timing Periods
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Market Timing Results (Jan 2013 - Dec 2019) Save

Market timing results from 2013 to 2019 are based on relative strength model holding the best performing asset. The model uses a single performance window of 12 calendar month(s). Timing model trades are executed using the end of month close price each month based on the end of month signals. The time period was constrained by the available data for Vanguard Total International Stock ETF (VXUS) [Feb 2011 - Jan 2020]. You can extend the backtesting period by using Vanguard Total Intl Stock Index Inv (VGTSX), which is the oldest share class of the fund.

Performance statistics for the timing portfolio and benchmark portfolios
PortfolioInitial BalanceFinal BalanceCAGRStdevBest YearWorst YearMax. DrawdownSharpe RatioSortino RatioUS Mkt Correlation
Timing Portfolio$10,000$24,46313.63%11.08%31.35%-7.57%-13.47% 1.141.860.97
Vanguard Total World Stock ETF$10,000$19,3399.88%11.17%26.82%-9.76%-14.45% 0.831.320.95
   
Notes on results:
  • Past performance is no guarantee of future results, which may vary. All use is subject to terms of service.
  • Investing involves risk, including possible loss of principal. The value of the investments and the income derived from them may fluctuate over time.
  • All portfolio returns presented are hypothetical and backtested. Hypothetical returns do not reflect trading costs, transaction fees, or taxes.
  • The backtested performance results are created by retroactively applying the specified investment strategy or methodology to historical data. Backtested models are developed with the benefit of hindsight but might not have foresight of the future.
  • The results are based on information from a variety of sources we consider reliable, but we do not represent that the information is accurate or complete.
  • The results do not constitute investment advice or recommendation, are provided solely for informational purposes, and are not an offer to buy or sell any securities.
  • The results are based on the total return of assets and assume that all received dividends and distributions are reinvested.
  • The selected portfolio allocation for comparison assumes monthly rebalancing
  • An equal-weight allocation is used for the assets held by the momentum model
  • The results for the timing portfolio assume monthly rebalancing trades
  • The relative strength signal is based on total return including dividends
  • Additional trading costs and taxes for timing models are not reflected in the results
  • CAGR = Compound Annual Growth Rate
  • Stdev = Annualized standard deviation of monthly returns
  • Sharpe and Sortino ratios are calculated and annualized from monthly excess returns over the risk free rate (3-month treasury bill)
  • Stock market correlation is based on the correlation of monthly returns
  • Drawdowns are calculated based on monthly returns excluding cashflows
  • Refer to the FAQ section regarding the data sources and methodology descriptions
Annual returns for the timing portfolio and various benchmark portfolios
YearInflationReturnBalanceVanguard S&P 500 ETF (VOO)Vanguard Total International Stock ETF (VXUS)
Timing PortfolioVanguard Total World Stock ETFTiming PortfolioVanguard Total World Stock ETF
20131.50%28.91%22.95%$12,891$12,29532.39%14.61%
20140.76%13.55%3.67%$14,637$12,74613.55%-4.74%
20150.73%1.31%-1.86%$14,830$12,5091.31%-4.19%
20162.07%12.17%8.51%$16,635$13,57412.17%4.81%
20172.11%21.12%24.49%$20,148$16,89921.77%27.45%
20181.91%-7.57%-9.76%$18,624$15,249-4.50%-14.43%
20192.29%31.35%26.82%$24,463$19,33931.35%21.75%
Monthly returns for the timing portfolio and various benchmark portfolios
YearMonthReturnBalanceVanguard S&P 500 ETF (VOO)Vanguard Total International Stock ETF (VXUS)
Timing PortfolioVanguard Total World Stock ETFTiming PortfolioVanguard Total World Stock ETF
201312.40%4.01%$10,240$10,4015.17%2.40%
201321.33%-0.31%$10,376$10,3681.33%-1.14%
201333.61%2.35%$10,750$10,6123.61%0.93%
201342.09%2.68%$10,976$10,8962.09%3.50%
201352.32%-0.56%$11,231$10,8352.32%-3.30%
20136-1.50%-2.66%$11,062$10,547-1.50%-3.57%
201375.30%5.16%$11,649$11,0925.30%4.62%
20138-3.08%-2.46%$11,290$10,820-3.08%-1.95%
201393.39%5.59%$11,673$11,4243.39%7.51%
2013104.47%3.71%$12,194$11,8484.47%3.67%
2013113.00%1.54%$12,560$12,0313.00%0.13%
2013122.64%2.19%$12,891$12,2952.64%1.52%
20141-3.53%-4.44%$12,436$11,748-3.53%-5.40%
201424.57%5.21%$13,004$12,3614.57%5.59%
201430.88%0.48%$13,118$12,4210.88%0.49%
201440.72%0.74%$13,213$12,5120.72%1.26%
201452.29%2.05%$13,517$12,7682.29%1.93%
201462.09%2.21%$13,799$13,0512.09%1.89%
20147-1.38%-1.75%$13,609$12,822-1.38%-1.73%
201483.97%2.65%$14,150$13,1623.97%1.16%
20149-1.38%-3.34%$13,955$12,722-1.38%-5.01%
2014102.40%0.94%$14,290$12,8422.40%-0.08%
2014112.76%1.26%$14,684$13,0052.76%-0.51%
201412-0.32%-1.99%$14,637$12,746-0.32%-3.87%
20151-2.87%-1.63%$14,217$12,539-2.87%0.27%
201525.58%5.95%$15,010$13,2855.58%5.78%
20153-1.57%-1.21%$14,775$13,125-1.57%-1.49%
201541.00%2.55%$14,923$13,4591.00%4.81%
201551.25%0.33%$15,110$13,5041.25%-0.91%
20156-1.95%-2.22%$14,815$13,204-1.95%-2.73%
201572.18%0.50%$15,138$13,2702.18%-0.56%
20158-6.14%-6.63%$14,209$12,390-6.14%-7.43%
20159-2.47%-3.71%$13,858$11,931-2.47%-3.85%
2015108.45%7.29%$15,029$12,8008.45%6.25%
2015110.43%-0.08%$15,093$12,7890.43%-1.32%
201512-1.74%-2.19%$14,830$12,509-1.74%-2.17%
20161-4.91%-5.87%$14,102$11,775-4.91%-5.45%
20162-0.21%-1.11%$14,072$11,645-0.21%-2.46%
201636.87%7.98%$15,039$12,5746.87%8.33%
201640.35%1.01%$15,092$12,7000.35%2.16%
201651.75%0.65%$15,357$12,7831.75%-0.98%
201660.32%-0.18%$15,406$12,7600.32%-0.90%
201673.68%4.15%$15,974$13,2903.68%4.52%
201680.12%0.35%$15,993$13,3360.12%0.45%
201690.04%0.79%$15,999$13,4410.04%1.70%
201610-1.79%-1.97%$15,712$13,176-1.79%-1.91%
2016113.73%1.19%$16,297$13,3333.73%-2.01%
2016122.07%1.81%$16,635$13,5742.07%1.96%
201711.78%3.00%$16,932$13,9821.78%4.08%
201723.88%2.69%$17,588$14,3583.88%1.34%
201730.13%1.48%$17,611$14,5700.13%3.00%
201741.04%1.63%$17,794$14,8061.04%2.05%
201751.40%1.95%$18,044$15,0941.40%2.96%
201760.63%0.63%$18,158$15,1890.63%0.63%
201773.37%2.65%$18,770$15,5922.06%3.37%
201780.54%0.42%$18,871$15,6570.29%0.54%
201791.88%2.11%$19,226$15,9872.04%1.88%
2017102.03%2.11%$19,616$16,3232.33%2.03%
2017110.63%1.90%$19,739$16,6333.06%0.63%
2017122.07%1.60%$20,148$16,8991.28%2.07%
201815.72%5.48%$21,301$17,8255.59%5.72%
20182-5.24%-4.44%$20,184$17,033-3.73%-5.24%
20183-0.38%-1.29%$20,106$16,814-2.48%-0.38%
201840.46%0.42%$20,199$16,8850.35%0.46%
20185-1.64%0.57%$19,868$16,9802.42%-1.64%
201860.76%-0.60%$20,018$16,8790.76%-2.14%
201873.56%2.88%$20,732$17,3643.56%2.55%
201883.22%0.86%$21,399$17,5143.22%-2.40%
201890.58%0.08%$21,523$17,5280.58%0.21%
201810-6.84%-7.82%$20,051$16,157-6.84%-8.56%
2018111.89%1.73%$20,429$16,4371.89%1.68%
201812-8.84%-7.22%$18,624$15,249-8.84%-4.93%
201917.92%7.99%$20,099$16,4687.92%7.67%
201923.25%2.82%$20,752$16,9313.25%1.63%
201931.92%1.06%$21,150$17,1121.92%0.77%
201944.03%3.47%$22,003$17,7064.03%2.77%
20195-6.35%-5.97%$20,607$16,648-6.35%-5.42%
201966.99%6.37%$22,047$17,7096.99%5.77%
201971.46%0.00%$22,369$17,7091.46%-1.99%
20198-1.64%-2.10%$22,002$17,337-1.64%-2.17%
201991.97%2.28%$22,436$17,7311.97%2.73%
2019102.18%2.79%$22,926$18,2262.18%3.43%
2019113.63%2.56%$23,757$18,6933.63%0.99%
2019122.97%3.45%$24,463$19,3392.97%4.38%
Portfolio return and risk metrics
MetricTiming PortfolioVanguard Total World Stock ETF
Arithmetic Mean (monthly)1.12%0.84%
Arithmetic Mean (annualized)14.32%10.55%
Geometric Mean (monthly)1.07%0.79%
Geometric Mean (annualized)13.63%9.88%
Volatility (monthly)3.20%3.22%
Volatility (annualized)11.08%11.17%
Downside Deviation (monthly)1.94%2.01%
Max. Drawdown-13.47%-14.45%
US Market Correlation0.970.95
Beta(*)0.941.00
Alpha (annualized)3.97%-0.00%
R289.97%100.00%
Sharpe Ratio1.140.83
Sortino Ratio1.861.32
Treynor Ratio (%)13.499.32
Calmar Ratio1.020.87
Active Return3.75%N/A
Tracking Error3.57%N/A
Information Ratio1.05N/A
Skewness-0.60-0.39
Excess Kurtosis1.060.60
Historical Value-at-Risk (5%)-5.91%-5.94%
Analytical Value-at-Risk (5%)-4.14%-4.46%
Conditional Value-at-Risk (5%)-7.04%-6.91%
Upside Capture Ratio (%)105.65100.00
Downside Capture Ratio (%)81.16100.00
Safe Withdrawal Rate22.78%19.39%
Perpetual Withdrawal Rate10.57%7.52%
Positive Periods62 out of 84 (73.81%)57 out of 84 (67.86%)
Gain/Loss Ratio0.860.89
* Vanguard Total World Stock ETF is used as the benchmark for calculations. Value-at-risk metrics are based on monthly values.

Drawdowns for Timing Portfolio

Drawdowns for Timing Portfolio (worst 10)
RankStartEndLengthRecovery ByRecovery TimeUnderwater PeriodDrawdown
1Oct 2018Dec 20183 monthsApr 20194 months7 months-13.47%
2Aug 2015Sep 20152 monthsMay 20168 months10 months-8.45%
3Feb 2018May 20184 monthsAug 20183 months7 months-6.73%
4May 2019May 20191 monthJun 20191 month2 months-6.35%
5Jan 2014Jan 20141 monthFeb 20141 month2 months-3.53%
6Dec 2014Jan 20152 monthsFeb 20151 month3 months-3.18%
7Aug 2013Aug 20131 monthSep 20131 month2 months-3.08%
8Jun 2015Jun 20151 monthJul 20151 month2 months-1.95%
9Oct 2016Oct 20161 monthNov 20161 month2 months-1.79%
10Aug 2019Aug 20191 monthSep 20191 month2 months-1.64%
Worst 10 drawdowns included above

Drawdowns for Vanguard Total World Stock ETF

Drawdowns for Vanguard Total World Stock ETF
RankStartEndLengthRecovery ByRecovery TimeUnderwater PeriodDrawdown
1Feb 2018Dec 201811 monthsOct 201910 months1 year 9 months-14.45%
2Jun 2015Feb 20169 monthsDec 201610 months1 year 7 months-13.76%
3Sep 2014Jan 20155 monthsFeb 20151 month6 months-4.73%
4Jan 2014Jan 20141 monthFeb 20141 month2 months-4.44%
5May 2013Jun 20132 monthsJul 20131 month3 months-3.20%
6Aug 2013Aug 20131 monthSep 20131 month2 months-2.46%
7Jul 2014Jul 20141 monthAug 20141 month2 months-1.75%
8Mar 2015Mar 20151 monthApr 20151 month2 months-1.21%
9Feb 2013Feb 20131 monthMar 20131 month2 months-0.31%
Rolling returns summary
Roll PeriodTiming PortfolioVanguard Total World Stock ETF
AverageHighLowAverageHighLow
1 year14.41%31.35%-7.57%10.69%26.82%-9.76%
3 years11.15%14.04%7.89%8.06%12.52%3.36%
5 years11.16%15.04%7.64%8.05%11.06%4.40%
7 years13.63%13.63%13.63%9.88%9.88%9.88%
Result statistics are based on annualized rolling returns over full calendar year periods
Timing periods and related holdings for the timing portfolio
#StartEndMonthsAssetsAsset PerformanceTiming PortfolioVanguard Total World Stock ETF
1Jan 2013Jan 20131100.00% Vanguard Total International Stock ETF (VXUS)VXUS: 2.40%2.40%4.01%
2Feb 2013May 201752100.00% Vanguard S&P 500 ETF (VOO)VOO: 76.21%76.21%45.13%
3Jun 2017May 201812100.00% Vanguard Total International Stock ETF (VXUS)VXUS: 10.11%10.11%12.49%
4Jun 2018Dec 201919100.00% Vanguard S&P 500 ETF (VOO)VOO: 23.13%23.13%13.89%
5Jan 2020Jan 20201Please sign-in for forward signals---