Very simple 401k strategy

[Tom Gnade]

My 401(k) is extremely limited, allowing just a few funds which are proxies for SPY and AGG. Many US 401(k) programs are similar. I wish we could self-direct in an investment account, but until then we have to do what we can with the tools we’re given.

Rather than just sitting the funds in a retirement target date fund or a static ratio like 60/40, I constructed a very simple momentum strategy. Since the selections are so limited, it is really difficult to get any kind of respectable result compared to the SPY index alone unless you look at extremely long timeframes that include both market meltdowns. It is precisely those periods of time when you most want a momentum strategy. The 20-year performance is significantly higher than a simple SPY index buy-and-hold, coming in at 481.75 total return vs 391.93. Volatility is roughly half that of SPY, at 10.121 vs 18.092, and the maximum drawdown is -16.05 vs -55.19%. It is possible to construct a more complex “matrix” of sub-strategies that results in slightly better results, which I might post some other time. This simpler variant implements each of the 3 different optimization strategies as sub-strategies, and then rotates between them, with the SRRP receiving an increased volatility multiplier so it doesn’t get selected too frequently, since it kills returns.

[StrategyTitle]
S401 – SPY – AGG – SR
[StockItems]
AGG=,2,1,1,0.00,,0,0
SPY=SPDR S&P 500 Index,2,1,1
[StockSets]
StockSet74=S401 – SPY – AGG – SR,3,3,StockSetStrategy74,2020-01-06,2020-01-06,AGG@1,SPY@1
[StockSetItems]
StockSet74Item1=11,StockSet74Item2,0,00000004,2,
StockSet74Item2=11,StockSet74Item3,1,00000008,2,
StockSet74Item3=-,-,2,00001000,3,
[StockSetStrategies]
StockSetStrategy74=2,2,,11,10,,1
[StockSetStrategyParameters]
StockSetStrategy74=-3,3,102,3,-2,7,-2,7,-10,7,-1,7,40.00,1,0.00,0,0,0,0.00,0,0.00,0,0.00,1,0,0,0,0,0,0,0,0,0.00,4,0.00,4,0,0,0,4,0,4,0.70,1,0.00,0,0.00,0

[StrategyTitle]
S401 – SPY – AGG – SRE
[StockItems]
AGG=,2,1,1,0.00,,0,0
SPY=SPDR S&P 500 Index,2,1,1
[StockSets]
StockSet72=S401 – SPY – AGG – SRE,3,3,StockSetStrategy72,2020-01-06,2020-01-06,AGG@1,SPY@1
[StockSetItems]
StockSet72Item1=11,StockSet72Item2,0,00000004,2,
StockSet72Item2=11,StockSet72Item3,1,00000008,2,
StockSet72Item3=-,-,2,00001000,3,
[StockSetStrategies]
StockSetStrategy72=2,2,,11,10,,1
[StockSetStrategyParameters]
StockSetStrategy72=-3,3,22,3,-4,7,-2,7,-10,7,-1,7,30.00,1,0.00,0,0,0,0.00,0,0.00,0,0.00,1,0,0,0,0,0,0,0,0,0.00,4,0.00,4,0,0,0,4,0,4,0.70,1,0.00,0,0.00,0

[StrategyTitle]
S401 – SPY – AGG – SRRP
[StockItems]
AGG=,2,1,1,0.00,,0,0
SPY=SPDR S&P 500 Index,2,1,1
[StockSets]
StockSet73=S401 – SPY – AGG – SRRP,3,3,StockSetStrategy73,2020-01-06,2020-01-06,AGG@1,SPY@1
[StockSetItems]
StockSet73Item1=11,StockSet73Item2,0,00000004,2,
StockSet73Item2=11,StockSet73Item3,1,00000008,2,
StockSet73Item3=-,-,2,00001000,3,
[StockSetStrategies]
StockSetStrategy73=2,2,,11,10,,1
[StockSetStrategyParameters]
StockSetStrategy73=-3,3,12,3,-6,7,-2,7,-10,7,-1,7,30.00,1,0.00,0,0,0,0.00,0,0.00,0,0.00,1,0,0,0,0,0,0,0,0,0.00,4,0.00,4,0,0,0,4,0,4,0.70,1,0.00,0,0.00,0

[StrategyTitle]
S401
[StockItems]
#S401 – SPY – AGG – SR=#S401 – SPY – AGG – SR,2,1,1,0.00
#S401 – SPY – AGG – SRE=#S401 – SPY – AGG – SRE,2,1,1,0.00
#S401 – SPY – AGG – SRRP=#S401 – SPY – AGG – SRRP,2,1,1,0.00
SPY=SPDR S&P 500 Index,2,1,1
[StockSets]
StockSet74=S401,1,3,StockSetStrategy74,2020-01-06,2020-01-06,#S401 – SPY – AGG – SR@1,#S401 – SPY – AGG – SRE@1,#S401 – SPY – AGG – SRRP@1,SPY@1
[StockSetItems]
StockSet74Item1=1111,StockSet74Item2,0,00000004,2,
StockSet74Item2=1110,StockSet74Item3,1,00000008,2,
StockSet74Item3=0001,StockSet74Item4,2,00000010,3
StockSet74Item4=-,-,2,00001000,3,
[StockSetStrategies]
StockSetStrategy74=2,2,,1110,10,,1@#S401 – SPY – AGG – SRRP,,,,4.000,
[StockSetStrategyParameters]
StockSetStrategy74=-3,3,144,3,-2,7,-1,7,-10,7,-1,7,15.00,1,0.00,0,0,0,0.00,0,0.00,0,0.50,1,0,0,0,0,0,0,0,0,0.00,4,0.00,4,0,0,0,4,0,4,0.80,1,0.00,0,0.00,0

[Author]

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