The Mama Bear Portfolio

The Mama Bear is based on the book Muscular Portfolios (BenBella Books, 2018). The portfolio is a clone of a strategy tracked since 2006, as publicly disclosed by Steve LeCompte, CEO of the CXO Advisory Group.

The Mama Bear is designed to (1) keep losses small during bear markets, (2) underperform the S&P 500 with less volatility during bull markets, and (3) wind up with superior performance over each complete bear-bull market cycle.

The investing menu consists of low-cost exchange-traded funds (ETFs) that track nine asset classes. Your portfolio allocates roughly equal dollar amounts to the three ETFs with the strongest momentum, as determined by the strategy rules.

The table below updates every 10 minutes during market hours. But don’t trade every day! Check and tune up your portfolio only once a month, on the same day of your choosing. According to several independent studies, the largest gain is achieved by reallocating on or around the last trading day of the month, as described in Newsletter #52.

Strategy rules:

  1. Select any consistent day of the month to reallocate your portfolio — ideally on or around the last trading day of each month.
  2. Momentum Rule: Before the market closes on your chosen day, note the ETFs with the highest 5-mo. gain (the green rows with a Buy percentage).
  3. If, because of a previous month’s rankings, you already own all of the ETFs in the green rows, do nothing.
  4. Sell any ETF you own that now has no Buy percentage.
  1. Use the cash from any sales to buy any indicated ETF you don’t already own. Exact percentages are not crucial.
  2. Hold each of the top 3 ETFs, whether the 5-month gain is positive or negative. Even if slightly negative, the strongest ETFs tend to rise in the following one month or more.
  3. Once purchased, there’s no need to rebalance an ETF back to its exact Buy percentage unless the ETF is more than 20% off its target dollar amount.

Execution Rule: Buy or sell an ETF only if its bid-ask spread is less than 1.0%. (If greater than 1.0%, a “flash crash” might be occurring. Check an hour later to see whether an orderly market has been restored.) Popular ETFs typically have spreads below 0.2%, but some bond and commodity ETFs have legitimately higher spreads due to greater trading expenses. For information on how to determine spreads and avoid flash crashes, see Newsletter #54.

 


KEY TO STATS

5-mo. gain is equal to an ETF’s nominal total gain (including dividends) over the past 105 trading days.

Prices and gains are only a few minutes old, while spreads are at least 20 minutes delayed. The numbers are recalculated approximately every 10 minutes while the market is open. To refresh your browser window, press F5 (Windows) or Command+R (Mac).

Bid-ask spread is the difference between the bid price and ask price of a security, typically expressed as a percentage. You may select prices for any day in the past three months using the orange calendar tool, but bid and ask prices are shown only on real-time websites, such as Yahoo Finance.

A flash crash is a temporary situation lasting a few minutes, during which prices and spreads suddenly move far from their typical values.


Screen results provided by  

ETFScreen.com/muscular-portfolios/mama-bear-record.php

 

 

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