This is the article displaying the portfolio by Alpha Architect. Here you will find a description, performance, and resources for the portfolio as well as detailed information on how to implement it yourself.
Alpha Architect Robust Portfolio, Momentum Winner
Wes Gray and Jack Vogel over at Alpha Architect constructed this portfolio. Alpha Architect employs mainly a tactical approach for portfolio construction. Alpha Architect has enjoyed a great deal of success because of their stock selection methodology, which they have documented several places. Among these are the 3 books
- DIY Financial Advisor: A Simple Solution to Build and Protect Your Wealth
- Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors
- Quantitative Momentum: A Practitioner’s Guide to Building a Momentum-Based Stock Selection System
They are all three extremely well researched and all evidence-based approaches that go beyond the buy and hold methodology. Their books are a nerd’s heaven.
Alpha Architect has entered the ETF business and has launched several ETFs based on their methodologies.
Description of the Alpha Architect Robust portfolio
The portfolio comes from mebfaber.com.
The Alpha Architect Robust portfolio is one of the very few portfolios that tilt towards momentum.
Momentum is one of the factors that contribute to returns along with market risk, size, value, and quality. This goes back to the Fama-French 3-factor model.
Mark Carhart demonstrated the momentum factor in his paper On Persistence in Mutual Fund Performance.
The Alpha Architect Robust portfolio is also tilted towards value and small-cap. The portfolio covers 4 of 5 factors setting it up for some great performance.
Let’s see how it performs.
Performance of the Alpha Architect Robust portfolio
|Portfolio name||Asset class count||1 year return (2019)||Year to date||10 year return||CAGR since 1989||Drawdown||Risk Level||Expense ratio||Yield|
|Alpha Architect Robust||8||20.53%||1.00%||9.07%||9.96%||-29.32%||4 - high risk||0.24%||2.15%|
The portfolio does really well, with tangent returns of the S&P but with much lower risk.
Asset Allocation of the Alpha Architect Robust portfolio
- 7.50% US Large Cap Value (VTV)
- 7.50% US Small Cap Value (VIOV)
- 10.00% REITs (VNQ)
- 7.50% International Large Cap Value (EFV)
- 20.00% Intermediate-Term Treasuries (VGIT)
- 10.00% Commodities (DBC / GSG)
- 30.00% Momentum Factor (MTUM)
- 7.50% International Small Cap Value (DLS)
Check the best mutual funds and ETFs here.
Resources for the Alpha Architect Robust portfolio
Alpha Architect has an extensive archive of podcasts and videos.
They are nerd and geeks by heart and also have an extensive research section comprising of white paper on investing.
By including momentum in their portfolio Alpha Architect manages to come within a smidgin of the S&P but with much lower risk.
What is your opinion on including a portfolio titted towards momentum?