Lesson 7 of 8

Choosing one

You have met the parts: a momentum score, a breadth count, one decision a month, the funds behind the tickers, and what the published falls were. This is the table from the front page, which should now read as facts rather than jargon.

One thing it deliberately does not have is a return column. With one, this becomes a ranking, and a ranked comparison published by a UK company is a financial promotion — a thing with rules attached that this site is not set up to satisfy. The columns that are here are properties of the rule, not judgements about it.

New to this? Start with VAA — it has the simplest rule and holds one fund at a time.

VAAVigilant Asset AllocationAll-in on one winner, out at the first bad signWorst fall−16.4%Holds1De-risksall at onceETFs7 DAADefensive Asset AllocationTwo bellwether assets decide when to take coverWorst fall−10.6%Holds1 · 4 · 6De-risksin three stepsETFs14 PAAProtective Asset AllocationEases out of risk as fewer assets trend upWorst fall−10.4%Holdsup to 7De-risksgraduallyETFs14 HAAHybrid Asset AllocationFour assets at once, out on an inflation warningWorst fall−9.7%Holds1 or 4De-risksall at onceETFs9 BAABold Asset AllocationStrictest guard: one warning and it's fully outWorst fall−8.7%Holds1 or 6De-risksall at onceETFs16 LAALethargic Asset AllocationMostly buy-and-hold, one slow economic switchWorst fall−15.0%Holds4De-risksa quarter of the portfolioETFs5

Worst fall is the deepest month-end drop in each paper’s own backtest, over periods running from the 1970s. Past results do not predict future returns.

What actually differs

Read down the Holds column first. VAA holds exactly one fund, every month. DAA steps between one, four and six as its canaries turn. PAA spreads across as many as seven. That single difference drives most of what you will feel: a concentrated rule moves further in both directions, and a spread one is duller in both.

Then De-risks. Some of these go from fully invested to fully defensive in a single step; others step down in stages. A rule that de-risks all at once is right earlier when a fall is real, and wrong more expensively when it is not.

ETFs is the practical constraint, and worth checking before the others. It counts the distinct funds your broker has to list, not how many you hold at once: BAA needs sixteen, LAA five. If you are outside the US, that is also sixteen UCITS substitutes you have to be satisfied with rather than five. A rule you cannot actually buy is not a rule you are running.

If you want a starting point

The table says it in one line — start with VAA — and now the reasoning can go with it. It is not that the figures back VAA: its published fall is the deepest of the six. It is that its rule is the one you can hold in your head, score four assets and go defensive if any is negative, so you can tell at a glance whether the site is doing what it says. That is worth more in the first year than a better-looking backtest.

The question underneath all of this is not which rule was best on the record. It is which one you would still be following in the eighth month of a fall, when it has been defensive for a while and the market has been rising for three weeks without you. Every one of these only works if it is followed; that is the part that is about you rather than the data.

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