First..an update of Mosaic’s performance last week relative to SPY. I’ve added a few metrics to help understand the differentials here along with a Max Drawdown value for each. Last week was a chance for Mosaic to demonstrate its risk management attributes as the larger indices adopted a skittish behavior at the 13K mark. Keep in mind these values reflect performance over the past 1000 trading days only and that Mosaic is more focused on portfolio management than trading in and out of issues. The anchoring ETFs for this model are held in the same proportions for the entire 1000 days so trading costs are minimal although positions may be rebalanced every 20 trading days in order to maintain those proportions. I used the words “may be” because momentum in Mosaic itself can create opportunities to either increase position sizing or further reduce risk exposure.
The upper chart reflects the actual $ equity in a single Mosaic position (currently $ 14,863.). That price chart is tracked with the MOM 14 & 30 exponential moving averages. The lower chart looks at the spread between those 2 MOMs and also considers the TrendX 10, which is a moving pivot signal defined in previous posts. Even though Mosaic and RM display distinctly smoother equity curves than SPY we can actually improve results further by following a few simple rules. First, Mosaic positions are engineered to be held for extended periods of time = years. During that time additional capital may be infused into the account and the most opportune times to do so are when the lower chart TrendX and MM spread are both upslope off the zero line. These zero line crosses occur about every 2-3 months so patience is a virtue with these models. What we clearly don’t want to do is increase position sizing when the MM and TrendX are downslope. While extremely fundamental in application, this simple trend following approach to laddering Mosaic positions can easily add 20% to the APR (not 20% + the existing 9%, but 120% X 9%). These trendlines may not correspond with SPY momentum but that is the utility of Mosaic.. to follow a different path to achieve both equity preservation and growth.
