Mastering Relative Strength Portfolios: Key Takeaways from the March STA Meeting
The latest STA meeting was packed with insights into Relative Strength Portfolios and trading strategies. Hosted by Jeff Boccaccio and featuring Zoe Bollinger, this session covered portfolio construction, risk management, and market trends. Zoe Bollinger is not only a VP at Bollinger Capital Management but she’s also a financial planner and IFTA board member.
Relative Strength Portfolios: What You Need to Know
How They Work: Relative strength investing is all about holding onto the strongest assets while they outperform. The goal? Maximise gains and minimise losses.
Building a Winning Portfolio
Key factors: • Asset selection (What’s in the mix?) • Timing & rebalancing (How often do you switch things up?) • Exit strategies (When do you call it quits?)
Back testing = Confidence
Zoe tested four historical relative strength approaches using the Russell 1000 index (20-year data). The result? It works across different markets.
Optimising Your Strategy
Rotation Frequency: Monthly Wins!: Weekly vs. Monthly rebalancing? Monthly rotation performed better, with lower turnover and better stability.
Hedging & Market Filtering: Managing risk with trend filters (like moving averages) can reduce drawdowns. In bad markets, going to cash instead of staying invested can be a game-changer.
Challenges to Watch: • Underperformance after bear markets • High turnover & tax implications • Market trends shifting quickly
Best Portfolio Setup? • 10-position portfolio with cast-out at the 25th percentile worked best • End-of-month evaluations gave the best results.
Risk & Portfolio Management Hacks
Balance is Key:• Too much concentration = risky • Too much diversification = weak returns • Solution? Find the sweet spot.
Bear Market Game Plan: Be prepared! Having pre-tested bear market strategies (hedging, cash moves) can save your portfolio when things get rough.
Algorithmic Trading & Volatility:Algo trading increases market noise, so managing volatility with smart exits and position sizing is crucial.
Final Takeaways
Conclusion – Keep an eye on relative strength trends and trade smart.
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