About The Strategy

The strategy invests in listed ASX equities that fall within the S&P/ASX 100 index. The investment premise is to identify the strongest trending stocks in this universe and hitch a ride on their upward movements. This ‘momentum effect’ has been shown to produce market beating returns and is based on investor psychology of wanting to own stocks that have performed particularly well in the recent past. An added benefit of the strategy is that it naturally builds a cash position when markets aren’t trending strongly or are falling.

Investment Characteristics

The ASX Momentum strategy has been developed and tested by simulating the investment performance over historical stock price data. This allows us to gather performance data based on how this strategy would have performed if we had run them during these prior time periods. The statistics in the table below summarise the results of this testing and compare them to the ASX 100.

*As at 31 December 2018, based on 15 years of back-tested data

Minimum Investment Amount and Period

There is no specific minimum investment amount although as the portfolio holds five stocks the minimum brokerage charged by your broker can put a practical limit on the minimum investment size. For example, if your broker charges a minimum of $10 per trade, this would represent a 0.5% charge on a trade size of $2,000 (portfolio size of $10,000 for five stocks). Given an annual portfolio turnover of approximately four times, this would produce an annual brokerage charge of 4%. In this example, with a minimum brokerage charge of $10, we would recommend an investment of no less than $10,000.

Rivkin recommends a time horizon of at least three years for this strategy due to the possibility of a negative return in any given year. Based on the strategy back-testing, the probability of a positive return over any three-year time horizon is 96% and therefore having an investment time horizon of at least this much maximises the probability of a positive investing outcome.

Fees and Charges

Rivkin’s advice product attracts a fixed annual subscription fee that does not depend on the amount invested. Other than this, the only fees and charges relate to those charged by your broker for trading. Under this model, the more funds you invest in our strategies, the lower the annual cost on a percentage basis. This strategy is also offered in a Separately Managed Account version for which you pay a small management fee for us to follow the strategy on your behalf.