### Can you regularly beat the market, cut volatility by 40% and max drawdown by 70% with only four trades a year, or is this too good to be true? ⚠️ Read an updated version of this post (covers up to 2025) [here](/post/the-worlds-laziest-trading-strategy-six-years-later) --- Active trading certainly isn't for everyone. Between spending time with family, going to work, running errands, paying bills, and not having the time or financial knowledge to invest wisely - it's easy to see why most people use the "Buy & Hold (Hope)" approach or choose not to invest at all. But what if there's a way for you to beat the market, earn an average of 20%/year, reduce volatility by 40% and max drawdown by 70% using only four trades a year? Surely trading this kind of strategy should be attractive for anyone. Here's a strategy that does just that. ***Note**: Past performance does not guarantee future results. I simply share my findings here not as a recommendation, but rather as back-tested results of a theoretical trading strategy, net of any commissions and fees.* --- ## The Lazy Strategy The premise of this strategy is that **(A)** the market tends to go up over time, and **(B)** precious metals tend to display a seasonal up-trend during December-February, and around August (see the below GLD chart, adjusted for seasonality). ![](./static/img/gld-seasonal.png) Legendary investor Warren Buffett once said (and then repeated) that "The trick is not to pick the right company, but rather to buy all the big companies through the S&P 500 and to do it consistently". Sound advice for 90% of people, indeed. That advice takes care of item **A** (the market tends to go up over time). But combining that advice with a bit of hedging and two seasonality trades/year can yield more attractive results. So, are you ready for this brilliant strategy? Ok, here it is: 1. Hold **GLD** (SPDR Gold Trust ETF) from December 20 of every year through February 20 of the following year, and during August. 2. The rest of the time hold **SPLV** (Invesco S&P 500 Low Volatility ETF) That's it! (I told you it was simple) ***I should point out that I haven't optimized this strategy at all. I simply "bought" Gold during its seasonal up-trend, and a low volatility "market" ETF the rest of the time.*** So how a strategy like this performed over time? Here are the results from May 5, 2011 (date of SPLV inception) through today (October 3, 2019): ```text Metric Strategy S&P 500 ------------------- -------- -------- Cumulative Return 429.44% 117.45% Yearly (ann.) 21.9% 9.67% Sharpe 1.73 0.71 Sortino 2.65 0.99 Max Drawdown -10.61% -19.78% Longest DD Days 258 416 Avg. Drawdown -1.45% -1.67% Avg. Drawdown Days 15 20 Volatility (ann.) 11.9% 14.58% Best Day 4.02% 4.96% Worst Day -3.75% -6.66% Best Month 12.27% 10.77% Worst Month -6.16% -9.18% Best Year 30.99% 29.6% Worst Year 1.53% -6.24% ``` ![](./static/img/lazy1.svg) To test how well this strategy would have performed before 2011, I've tested it using **JKD** (iShares Morningstar Large Core Idx) at 25% holdings, to (sort of) match the volatility of **SPLV**. Here are the results from Jan 2, 2004 through today (Oct 3, 2019): ```text Metric Strategy S&P 500 ------------------- -------- -------- Cumulative Return 818.56% 161.09% Yearly (ann.) 15.11% 6.28% Sharpe 1.33 0.43 Sortino 2.02 0.6 Max Drawdown -20.43% -56.78% Longest DD Days 349 1,996 Avg. Drawdown -1.37% -1.93% Avg. Drawdown Days 18 33 Volatility (ann.) 11.03% 18.13% Best Day 4.67% 11.58% Worst Day -3.98% -9.03% Best Month 12.27% 10.77% Worst Month -9.29% -16.94% Best Year 30.99% 29.6% Worst Year -2.56% -38.49% ``` ![](./static/img/lazy2.svg) Note that aside from a ~20% drawdown in the peak of 2008's market crash, the maximum drawdown is around -10%, which fits most people's risk tolerance. Check out the **complete tearsheet** for this strategy, generated by [QuantStats](https://github.com/ranaroussi/quantstats), of course :-)