Higher Returns With Dual Momentum Investing

Successful investment strategy requires a defined skillset. It is helpful to approach the markets with confidence, curiosity, and a critical mindset. And since generating higher returns is at the heart of every investor’s approach, these skills can be used to effectively improve gains while minimizing losses.
One innovative approach to the investment market is dual momentum investing. It is an interesting and valuable strategy as it not only takes a simple path to working with the premier anomaly, it is an effective way to minimize risk while maximizing gains.
Here we look at dual momentum investing as part of a diversified approach. The forefather of dual momentum, Gary Antonacci, has laid out his view of this method and we investigate whether this unique approach can be useful for your investments.


Exploring Momentum in Investing

Momentum in the investment world can be described as relative and absolute. Relative momentum explores asset returns that are compared with other assets. Studies show that relative momentum returns more strongly than benchmark, but the payback is the significant volatility the investor must endure. Depending on your attitude to risk, the rewards may not be worth the process.
InAntonacci’s 2012 book, he explores the absolute momentum as well as the relative momentum of an asset. In other words, the momentum as compared to the asset itself and not to other assets. By combining the relative and the absolute momentum of assets, Antonacci discovered he could reduce volatility and more effectively manage risk. It is recommended you read his work in order to get a full picture of the investment strategy. In addition,Turing Trader explains Dual Momentum system in an accessible way.
The first step is to compare assets against each other and identify those that have a higher return than another over the relevant time period. Dual momentum then compares these assets to themselves over the time specified. If they generate positive absolute momentum, they are valuable assets to consider purchasing.

Benefits of Dual Momentum Investment

This approach applies in the long term, yet it can also be applied on a short term basis. However, it is a strategy best suited to the long term and also appears to be more effective when working with equities.
The dual momentum approach is simple and straightforward. It does not require much management. Some adjustments in position every month are required, but there is relatively low volatility and instead a steady rate of return.
It is an effective strategy to use when you begin investing, and while it may not be a get-rich-quick approach, it will prove itself to generate higher rewards over the long term.

Disadvantages of Dual Momentum

So, if the method is so simple and returns are satisfactory, why doesn’t everyone use this approach? Dual momentum is not for all investors. Since it is such a simple approach, it doesn’t appeal to all people, including those that like the challenge of more volatility and a more intellectual approach to the markets. However, since there is still a degree of intricacy attached to the strategy, and it does produce results relatively quickly, it is a good position to take to learn more and develop your investment market skills.

Just as there are many skills linked to successful investing, there are many ways to build a successful investment strategy anddifferent types of momentum to work with. Using dual momentum is part of a diversified portfolio that works across a wide geographical and time range. It helps to work with proven strategies such as this, particularly when you are beginning your investment journey, so you can hone your abilities and work out which approach suits you best.