IMOM
Alpha Architect International Quantitative Momentum ETF
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Considering adding some tilt, wanted to hear more feedback
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I do. **Portfolio Allocation** **56.88% — Global Multifactor** 18.96% AVUV 18.96% AVDV 18.96% AVES **19.38% — Momentum** 9.69% QMOM 9.69% IMOM **21.25% — Alternatives** 5.31% ALLW 5.31% IALT 5.31% HFGM 5.31% DBMF **2.50% — World Beta** 2.50% VT **Total: 100%**
Yeah, agree. Do you own IMOM or IMTM?
Good point re: Japanese stocks on fire. I’ll do some factor regression on Portfolio Visualizer for IMOM vs IMTM as I’d really like to add some int’l momentum with QMOM, but also wondering if my Avantis ETFs are enough from a simplicity standpoint (since they do take into consideration momentum when buys/sells are made)
It hasn't worked historically in Japan, doesn't mean it won't now! If it is 30% of IMOM that means Japanese stocks it holds are on fire. IVAL & IMOM are both highly dynamic in country weights so this isn't a longterm thing. IVAL is 50% Japan last I looked.. cheap stocks with high momentum is the ultimate combo. No good reasons for the attribution, but the fair thing to compare to would be other ex-US momo funds like IMTM, not QMOM... Still underperforming but not nearly as much.
I saw something on X about how momentum doesn’t work well in Japan, but that’s 30% of IMOM top holdings. Any idea why it has been such a dog vs QMOM?
Maybe ride the momentum wave with QMOM or IMOM
I do enjoy the pod. If you really wanna get weird I’ll recommend the rest of my port, QVAL, QMOM, IVAL, IMOM.
Only in the US would someone say “x is basically every domestic stock, you can’t get more diversified than that”! Seriously, buy at least market cap weight ex us, developed and developing. I’d also consider some systematic ETFs. Small cap value (avuv) is paying out right now. Momentum (QMOM/IMOM) has been paying out, and if well implemented should keep paying out once the algorithm picks up on the new gainers (assuming the rotation into small caps is here to stay). Other factors such as quality/profitability can be captured in ETFs and tend to outperform, particularly in a downturn. Finally, you could add some alternatives. DBMF replicates the performance of a basket of top commodity trading hedge funds. AQR have good systematic strategies with good returns uncorrolated to equity markets (e.g. QDSIX)
Remindme! 20 years “Boglehead cultist who claimed he’d see 30% gains from ex-US in a decade actually needs 20 years instead. The clown is investing in AVDV, AVES, and IVAL and IMOM”
AVDV, AVES, and IVAL are my ex-US funds. See you in 20 years. I also use IMOM for foreign momentum.
QVAL, AVUV, QMOM, IVAL, AVDV, IMOM, AVES and a bunch of commodity and bond futures (long/short trend following). Overall 100% equities 100% exposure to a \~20% volatility managed-futures program. No S&P500 in sight...
0%. You want more risk? Hold small-value (AVUV), maybe momentum (QMOM), or even add a managed futures overlay (RSST is 100% S&P500 plus 100% trend overlay). And don’t forget foreign stocks (AVDV, AVES, IMOM, etc).
No. I would pair it with profitability and Momentum and size... ...All things Avantis already does to an extent. If you wanted a diversifier you might throw in a 40% or lower allocation to QMOM/IMOM
Would probably be better off just investing in a Momentum fund like QMOM/IMOM so you get exposure to whatever has been doing well recently. Have none of the FOMO since you know you have dedicated exposure to the latest 'buy this stock now' industries that are a legitimate buy. Then when stockpicking would provide Alpha you'll generally achieve it. Past performance example: https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2022&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=QMOM&allocation1_1=100&symbol2=VTI&allocation2_2=100&symbol3=BJK&allocation3_3=100
Thanks a lot. Two questions: Regarding asset location/allocation, how did you implement trend? When you delve into niche products like those, how do you view the higher fees (between 50-100bps)? I'm including QMOM/IMOM as well. (So far I'm 90% scv and 10% momentum, simply because the second tax advantaged account (rrsp) has a lower cap due to pension and I don't want to manage a portfolio across different accounts).
If you want to seek out undervalued stocks there's a few routes people generally recommend as a good go-to: Avantis Value ETFs Alpha Architect Value (QVAL & IVAL) ETFs (highest expense ratio & most concentrated) Dimensional Fund Advisors (DFA) Value ETFs These have systematic strategies so they can sell stocks when they're no longer amongst the most undervalued by the system's criteria. Generally best to pick DFA and Alpha Architect or Avantis and Alpha Architect, or just stick to one of the three fund companies. Regardless, note that this isn't a get rich quick scheme. It's a 'slightly outperform the market over the long run with potential for deep drawdowns when the market isn't drawing down'. Can also look to Alpha Architect's Momentum funds QMOM and IMOM for a performance chasing type of strategy. Another to look into along that line of thinking is the MOOD ETF, brand new fund that combines momentum with relative sentiment analysis. Finally, if you want an automation of both Momentum and Value together with technical analysis's trend-following look into the VMOT ETF. Note: all Alpha Architect ETFs come with a 2% cut of the total transaction. Only go into these if you're sold for the long run and will not sell even if you end up down in the strategy by 60% with the market down less or not down at all. I.e. These aren't apples to apples comparable to a standard market strategy. If you prefer lower volatility stick to the market generally, add VMOT if you can stick with it for more diversification with lower drawdowns.
I would ask in the Rational Reminder Community's Portfolio Discussion thread since they're a global community that's pretty specialized in factor based investing. In the US people often have to use QMOM and IMOM for proper cap-agnostic Momentum.
What you are describing is performance chasing. Look into QMOM, IMOM, KMLM, and VMOT if you want to do it hyper conservatively.
Highest expected returns over the long run yet hardest to stick with would be via factor based investing. Some guy that goes by the name Spreadsheets retired last March. He is withdrawing only 2 to 4% a year from a portfolio of 20% QMOM 20% IMOM 30% AVUV 30% AVDV. 60% Value strategy 40% Momentum strategy. Long-only Generally the risk is that it has huge tracking error from the market. At the same time the large caps are overvalued relative to history so being in undervalued 'value' stocks kinda just makes sense... Do your own due diligence. Read the Alpha Architect books on Value and Momentum if you like learning from Data.
Obviously not financial advice; AVUV/AVDV for small caps specifically RPV/IVLU for large cap value side QVAL/IVAL if someone wants a concentrated fund cap-agnostic (more expensive relative to the other funds above) All have extremely low overlap with VBR. VBR neither captures small nor Value effectively unfortunately. QMOM and IMOM worth looking into for anyone that believes specifically in Momentum and not just Value. Usually held at weighting of 60 Value: 40 Momentum. Pairs well with the above too. Tool for testing overlap https://www.etfrc.com/funds/overlap.php
So small/micro-cap stocks are supposed to have borrow fees in excess of 30%? I'm not so sure. Looking at table 5 [here,](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3726227) low fee US-listed small caps have a weighted avg borrow fee of just 10 bps, and high fee small caps have a weighted avg borrow fee of 2.39%. Far from 20%+. And even if we consider VFMF to be an anomaly because of how small it is, LRGF and SMLF both have over 1B in AUM and still have very high borrow fees, especially compared to similarly sized or smaller single-style ETFs like QVAL, IMOM, FRDM, etc.
I'm not really sure myself for the US, VFMO and QMOM are good options, for international IMTM or IMOM. QMOM and IMOM are more concentrated(50 stocks equal weighted) and more expensive but you get higher momentum exposure with them. VFMO seems to be a really good overall momentum fund and pretty cheap. IMTM seems kinda ok.
Momentum/growth are not the same. Momentum can be in growth for some periods. But it can also be in value, whatever performed better in the 12-2 months timeframe. I'm currently considering adding a bit of momentum funds to the portfolio, but probably not much and I'm not sure about QMOM or VFMO and IMOM or IMTM yet. Avantis already implements "opportunistic momentum" because they will wait to buy a security with negative momentum and will also wait to sell a security with positive momentum. It is hard to tell how much moment this will capture in the long run.
Here is a good start if you want to know how well stock picking really works. https://youtu.be/AecvTErBQY8 Then you can follow the path down analysing funds by doing factor regression, compare diversified and concentrated funds and end up with 30% QVAL, 30% IVAL, 20% QMOM and 20% IMOM and a burned sofa.
Identifying factors is one thing. Implementing them in a real world portfolio is another challenge altogether. In a nutshell, the Momentum factor is hard to capture and profit from in the real world after fees and the aforementioned trading costs and high turnover necessary to chase the factor. The Momentum premium decays quickly. [Dimensional found that](https://www.dimensional.com/us-en/insights/have-investors-benefited-from-momentum-strategies) “10–12 months after classification as high momentum, the excess return of upward momentum stocks was no longer positive on average.” They also looked at U.S. funds claiming to target Momentum and concluded that “the vast majority were unable to convert favorable premium performance into higher-than-market returns, after fees and expenses.” Basically, the Momentum factor premium can be simulated just fine in the lab, but can’t be captured – at least so far – in a live fund in a cost-efficient way that delivers excess return to the investor. Funds that attempt to capture Momentum include MTUM, PDP, QMOM, and IMOM. The performance of some of these funds can largely be attributed not to their capturing the Momentum factor, but simply to their exposure to market beta and large cap growth stocks, which have had a stellar run over the last decade. We can see this in the fact that the returns of these funds are not correlated with the actual Momentum factor. Moreover, long-short strategies that would provide the truest loading on Momentum are not available in the retail space.