SMI S&P500 Conclusions

Definition of the strategy

With the Single Momentum Investing (SMI) strategy we compare ETF prices of the previous day with the price x market days (the interval) earlier. If the market price of the previous day is equal to or higher than the reference price we buy or keep the ETF; if it is lower we sell the ETF or stay in cash. The interval used, is the optimal interval for the index in the ten years preceding to the investing decision.

Summary of the numbers

CAGR averageCAGR minimumCAGR maximum
SMI 1year6.59-11.7932.16
S&P 1year8.96-40.2232.16
SMI 3years7.29-6.1325.44
S&P 3years8.13-13.1727.79
SMI 5years7.27-0.3919.51
S&P 5years7.69-4.4625.27
SMI 10years7.394.1211.29
S&P 10years7.47-3.1115.66
Return of SMI strategy and S&P index for 25 investingperiods of 1,3,5 and 10 years


If investment periods are long enough (at least three years), with the SMI S&P500 we get returns that are on average comparable or slightly lower than the evolution of the index. The minimum return for the different investingperiods, though, is consistently higher. With this strategy the returns move in a narrower band, with limited downside risk.

Transaction costs affect the ultimate results. We estimated the effect of transaction cost in the second section of our analysis. But in the deeper analysis we didn’t take them into account anymore because the cost per transaction depends on the broker and on taxes in the investor’s country. Besides that, with this strategy we have a transaction in only 2.2% of market days.

For whom

An investing horizon of at least five years is best. If it is lower, for example three years, backtesting for the previous 28 years still shows some three-year periods with negative returns.

We demonstrated, with this strategy it is not necessary to check your investments every day. Results of backtesting suggest the returns are not negatively affected by control periods of up to 11 market days.

The future

So far we use intervals up to 200 market days. In the most recent years we saw two very sharp V-shaped corrections. For these years longer intervals would have given better results. We still prefer the shorter intervals since it gives us better protection in deeper and longer lasting bear markets (as we have seen in 2000 after the burst of the dotcom bubble and in 2008 with the financial crisis). We’ll follow this up and if necessary we’ll adapt our strategy.