It’s a lazy week
Editor’s note (14 My 2026): I was made aware by the good people at Allocate Smartly that they have tested the Lazy Man’s and found that it stopped working around the turn of the century: https://allocatesmartly.com/challenging-the-lazy-mans-momentum-strategy/ Big thanks for pointing that out to me.
Yesterday, I gave professional investors an idea of how to be lazy when it comes to market returns in the second month of a quarter. Today, I go a step further and explain what Javier Estrada calls ‘The lazy man’s momentum strategy’, which can be used by retail and professional investors alike.
Most readers will know that momentum strategies work well but suffer from some significant drawbacks. One of them is their vulnerability to momentum crashes, which can be mitigated with strategies like this one or this one.
Another drawback is that they can have large turnover from month to month, creating high transaction costs and often equity portfolios that are invested in a large number of stocks. Estrada’s lazy man momentum strategy tackles this drawback.
What he did was to look at individual country ETFs rather than single stocks. This reduces the number of instruments to follow dramatically and the number of positions in a portfolio to 11 or fewer, in his case. The good news is that by now, there are country ETFs replicating the MSCI country indices for most developed markets, so investors should have no problem finding these instruments.
The second thing he did was reduce the rebalancing from monthly to every six months, and instead of looking at the past 12-month return, he looks only at the last six-month return, thus emulating something like this momentum strategy.
The results are not that bad. The winner countries in this lazy momentum strategy manage to outperform the MSCI World by about 3% per year (before transaction costs) while the loser countries underperformed the MSCI World by 1.2% per year. The long-short winners-minus-losers portfolio had an annual return of 3.4% with no correlation to the MSCI World and much lower volatility.
I know, it’s not earth-shattering, but for lazy investors, it is quite a tempting, simple strategy.
Risk-return trade-off
Source: Estrada (2026)
Hi Joachim - Big fan of your work. We tested this strategy using MSCI country indices back to 1971 and found that it has been ineffective since mid-2000: https://allocatesmartly.com/challenging-the-lazy-mans-momentum-strategy/
The country-level approach is where this strategy gets unintentionaly smart in the current environment. A six-month momentum screen run today would mechanically overweight energy exporters like Canada and Norway and underweight energy importers like Japan and South Korea. The strategy doesnt know about Hormuz. It just sees which country indices outperformed over the trailing period and follows the signal.
Thats actually the strongest argument for momentum strategies generally. They capture structural macro shifts without requiring the investor to identify or understand the cause. The energy shock is repricing country-level equity returns in real time. A momentum screen picks that up as a statistical signal and positions accordingly, while a discretionary investor is still debating wether the disruption is temporary or permanent.
3% annual outperformance with semi-annual rebalancing and 11 positions is the kind of strategy that survives precisely because its too boring for most investors to stick with.