Quiet Compounding Overview
| CAGR | 16.2% |
|---|---|
| Maximum drawdown | -7.2% |
| MAR ratio | 2.24 |
| History | 23 years (281 months) |
Quiet Compounding is a portfolio of four strategies rather than a strategy in its own right. It holds Carrier, Catalyst, GPMv and Triad at 25% each, every one in its base unleveraged form, and rebalances back to equal weights once a year.
The aim is in the name. Market-like returns, a fraction of the drawdowns, and as little drama along the way as the components allow. It is built to be the part of a portfolio you do not have to think about.
What It Holds
Each component has its own page, and you can visit them for more details on each strategy used in this portfolio. What matters here is what each brings to the blend.
| Component | Weight | What it contributes |
|---|---|---|
| Carrier | 25% | Credit regime positioning. It stays invested unless the high yield credit spread signals real stress, and favors long-term gains. |
| Catalyst | 25% | Macro regime positioning. It resolves a growth and inflation regime and holds the sleeve built for it. |
| GPMv | 25% | Protective momentum. Market breadth across eleven risk assets sets how much of the sleeve is at risk. |
| Triad | 25% | Rotational momentum. Three independent momentum sleeves, each with its own defense. |
All four are held unleveraged. No leveraged variant of any component appears in this portfolio.
Why a Portfolio of Strategies
They fail at different times
The reason to combine strategies rather than assets is that a good strategy already diversifies across assets. Stacking several of them only helps if they are reading different things, and these four genuinely are.
Carrier watches the high yield credit spread, which is the bond market's reading on how worried lenders are about getting paid back. Catalyst watches breakeven inflation and growth to classify a macro regime. GPMv watches breadth, counting how many of its eleven risk assets still carry positive momentum after a penalty for moving in lockstep with everything else. Triad watches the relative momentum of its own sleeves. Four different questions, asked of four different inputs.
The practical consequence is that they rarely go defensive in the same month. One sleeve stepping aside while the others stay invested is what produces a return stream smoother than any of its parts, and it is a very different thing from holding four strategies that would all bail out on the same signal.
The blend beats its own components
Over the common history, Quiet Compounding earns more per year than three of its four components, takes a shallower worst decline than any of them, and scores higher on risk-adjusted return than all four, including Catalyst, which compounds considerably faster and is a rougher ride. The mix is better than any single piece of it.
That is what genuine diversification looks like when it works, and it is the whole case for this portfolio.
Different speeds, too
The four also move at different speeds. Carrier is slow by design: it steps aside only for genuine credit stress and otherwise holds long enough that most of its gains are long-term. GPMv takes risk off in steps rather than all at once. Catalyst and Triad reassess every month. A portfolio that mixes a slow, patient engine with faster ones gets some of the benefit of each.
How It Was Built
Equal weight on purpose
Each component carries the same 25%. No single engine is large enough to dominate the result, and no single signal can move more than a quarter of the portfolio on its own. Equal weight also avoids leaning on whichever component happens to have the best backtest, which is the easiest way to fit a portfolio to its own history.
The passive sleeve was measured and removed
An earlier version of Quiet Compounding held a third of the portfolio in a five-ETF basket of diversifiers: managed futures, global macro, long/short equity, gold and a tail-risk fund. The intuition behind it was ballast.
Its one defensible role was protection in a 2022-style joint decline in stocks and bonds, and that did not survive testing either. Sliding the basket from nothing up to 15% of the portfolio improved calendar-2022 return by about a third of a percentage point, and cost roughly 1.2 points of annual return in every other year. The ballast sleeve was dropped in favor of active strategies.
Rebalancing
Quiet Compounding resets to 25/25/25/25 in January, and only in January. Between resets the block weights drift with each component's returns, so a strong year for one strategy leaves it above 25% until the next January.
That is a deliberate choice rather than an oversight. Annual rebalancing lets winners run for a while, cuts the trading a monthly reset would require at the portfolio level, and matters less than it might sound, since each component already manages its own holdings internally.
The Mix Can Change
Quiet Compounding is a portfolio of DMS strategies, and the DMS lineup is not frozen. New strategies are added and existing ones are refined over time, and when a new or updated strategy would make for a better risk-adjusted portfolio, the strategies and weights used here may change. Changes take effect at the start of a new month, never partway through one.
When the mix changes, the history shown on this page is recalculated as if the current mix had been held throughout. The record describes today's portfolio, not the path an investor following it would actually have taken, which is one more reason to read it as a backtest rather than a track record.
Why the Record Starts in 2003
Every strategy on this site is shown over the longest history its data honestly supports, and for Quiet Compounding that is shorter than most of the strategies.
The binding constraint is Catalyst, whose regime classification depends on market-implied inflation expectations. That data series begins in 2003, so the portfolio's history begins there too. The other three components have longer records on their own pages.
The practical implication is that comparisons between this portfolio and strategies whose histories reach back to 1980 are comparing different eras as well as different designs. The tables below hold every row to the same window to avoid exactly that problem.
Performance Highlights
Over the full available history, alongside its own components:
May 2003 through September 2026, net of trading friction:
| CAGR | Max Drawdown | Ulcer Index | UPI | |
|---|---|---|---|---|
| Quiet Compounding | +16.2% | -7.2% | 2.12 | 6.89 |
| Carrier | +12.4% | -16.1% | 4.72 | 2.28 |
| Catalyst | +24.5% | -14.4% | 4.48 | 5.10 |
| GPMv | +11.5% | -11.7% | 3.09 | 3.19 |
| Triad | +15.6% | -8.7% | 2.34 | 5.95 |
| S&P 500 | +11.3% | -51.0% | 11.72 | 0.82 |
The Ulcer Index measures how deep the portfolio went and how long it stayed there, so lower is better. The last column is the Ulcer Performance Index: return above cash divided by the Ulcer Index. Max Drawdown reports the worst single moment; UPI reports the experience of holding it. Higher is better.
Read the top row against the four below it. Quiet Compounding takes a shallower worst decline than any of its own components and scores higher on UPI than all of them, including Catalyst, which compounds far faster. Mixing four strategies that fail at different times produced something none of them is individually.
Against the index, it earns several points more per year with a worst decline in the single digits. A decline of the size the index has suffered takes more than doubling to recover from, and most investors do not sit still for that.
The same six, measured from January 2008, so the window opens just before the financial crisis rather than after it:
January 2008 through September 2026, net of trading friction:
| CAGR | Max Drawdown | Ulcer Index | UPI | |
|---|---|---|---|---|
| Quiet Compounding | +15.3% | -7.2% | 2.25 | 6.23 |
| Carrier | +12.3% | -16.1% | 4.84 | 2.27 |
| Catalyst | +22.5% | -14.4% | 4.79 | 4.43 |
| GPMv | +10.6% | -11.7% | 3.20 | 2.91 |
| Triad | +14.8% | -8.7% | 2.50 | 5.42 |
| S&P 500 | +11.0% | -48.5% | 11.64 | 0.83 |
The ordering is unchanged, and the worst declines are identical in both tables for all five strategies, which means every one of them saw its deepest drawdown after 2008 rather than during the crisis itself.
Two cautions apply here as everywhere. These records are backtested, and a portfolio assembled from components chosen after their histories were known deserves more skepticism than a single strategy does, which is one reason the weights are simply equal rather than tuned. And a single figure covering two decades says nothing about the order the returns arrived in, which is most of what an investor lives through.
Portfolio Characteristics
- Four independent engines. Credit regime, macro regime, breadth-driven protective momentum and rotational momentum, each reading different inputs.
- Rarely all defensive at once. The components step aside on different signals, which is what smooths the ride.
- Equal weight. No single component or signal controls more than a quarter of the portfolio.
- Shallower than its parts. The blend's worst decline is smaller than any individual component's.
- No leverage anywhere. Every component is held in its base form.
- Annual rebalancing at the top level. Weights reset each January and drift in between, while each component manages its own holdings.
- Substantial underlying turnover. The portfolio itself trades rarely, but three of its components trade regularly, so the trading is real even if you never place those orders yourself.
- Best suited to tax-deferred accounts. Carrier's share is built to realize mostly long-term gains, but the other components generate short-term gains. In a taxable account, plan accordingly.
- Shorter history than most strategies here. The record begins in 2003 because of Catalyst's data dependency.
- Fully mechanical. Every allocation follows from published rules with no discretionary override.
Who It's For
Quiet Compounding is designed for investors who want:
- Strong long-run returns without the volatility of an equity portfolio.
- Drawdowns shallow enough that staying invested is realistic rather than aspirational.
- Diversification across strategy types rather than across asset classes alone.
- An anchor holding, including as the conservative side of a barbell with something more aggressive beside it.
- One portfolio to follow instead of four.
It is a poor fit for investors seeking the highest possible compounding rate, who are untroubled by deep declines, or who want a long backtested record. Those wanting more return and accepting more volatility should look at Catalyst or the Calculated Risk tiers.
Quiet Compounding can be followed through the AutoPilot platform.
Past performance, including backtested results, is not indicative of future results. Backtested performance is hypothetical, does not reflect actual trading, and benefits from hindsight in the selection of strategy rules and component weights. Portions of the history rely on reconstructed proxy data for funds that did not exist for the full period. Investors should carefully consider their risk tolerance and consult with a financial advisor.
For the latest details, visit www.DualMomentumSystems.com