Using Simple Momentum to Beat the Market
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It's easy to go down the rabbit hole of trying to beat the market.
Index funders can be so sanctimonious that it's easy to get motivated to make them eat their words.
Plus, if we beat the market...we make more money!
But that rabbit hole is a dangerous one.
It can get us lost in arguments about sample size, walk-forward testing, indicator effectiveness, and now A.I. expertise.
We can spend so much time worrying about how to beat the market that we never actually getting around to doing it.
That's how index funders win.
And that's usually the reason we fail.
But there is a solution.
It's a painfully simple one.
We can use momentum.
Because the #1 indicator of whether something will go up is if it's been going up. It really is that easy.
And research has proven this to be true for hundreds of years.
But, again, we can get bogged down with questions like, "Okay, what is momentum? How do we define it?"
Then it's back down the rabbit hole we go.
So, let's create a portfolio that's so simple it can't be screwed up.
That's what I did over a year ago.
I went back and found every ETF that had beaten the market for its entire existence. I wanted ten years of outperformance but I settled for five.
If it was better than the market, then it's in.
Here's what that looked like at the start of January 2024:
As you can see, TMFC has only been around since February 2018. That being the case, I ran this portfolio against the market from Feb. 2018 through Dec. 2023. Here's how it did:
The portfolio beat the market handily over several years.
So if it outperformed for years, what's the likelihood it will keep outperforming?
If we believe the momentum research, the likelihood is good.
Let's see if it's true. Here's the report from Jan. 2024 to May 2025:
Well, look at that. The portfolio that beat the market handily for years has also beaten the market recently.
Apparently momentum is real.
And maybe all we have to do to beat the market is to keep riding that momentum.
