Triad Strategy Overview

Triad is a three-sleeve, momentum-driven allocation strategy developed by Randy Harris of Dual Momentum Systems, designed as a forward-looking alternative to the traditional 60/40 portfolio. Rather than splitting capital between stocks and bonds and hoping the two stay uncorrelated, Triad divides it among three independent return streams, each with its own momentum signal and its own exit to safety.

The premise is simple: a portfolio should not depend on any single engine. Triad runs three, and lets each one decide independently whether it belongs in the market at all.

Core Strategy Logic

Triad allocates across three sleeves that operate independently of one another. Each sleeve combines relative momentum (which candidate is performing best) with absolute momentum (is that candidate actually trending upward), and each one exits to Treasuries on its own signal without consulting the others.

Sleeve 1 - Real Assets (nominal 30%)

Selects the stronger performer between gold (SGOL) and broad commodities (PDBC) on trailing six-month return, then tests the winner against its own eight-month trend line. A winner that fails the trend test sends the sleeve to Treasuries instead.

This is the sleeve that tends to work when the other two do not: inflation shocks, currency stress, and the periods when stocks and bonds fall together.

Sleeve 2 - U.S. Large Cap (nominal 35%)

Holds U.S. large-cap equities (IWB) whenever they are above their eight-month trend line, and Treasuries when they are not. There is not another asset that battles with IWB to be picked with higher relative momentum. This sleeve is deliberately the simplest of the three, because U.S. large cap is the portfolio's primary growth engine and adding selection complexity to it has historically cost more than it earned.

Sleeve 3 - Secondary Growth and Diversifiers (nominal 35%)

The broadest sleeve, selecting the single strongest of four candidates on trailing six-month return:

• International equities (VXUS, paired with a currency-hedged sibling)
• U.S. mid-cap value (IWS)
• Managed futures (DBMF)
• Long/short equity (CLSE)

The winner is then tested against its eight-month trend line, and goes to Treasuries if it fails.

Managed futures and long/short equity are in this sleeve specifically because they are uncorrelated with the equity candidates, not because they score well on their own. They earn their place by winning the selection in months when both equity candidates would have failed their trend test, which keeps the sleeve invested where a narrower version would have retreated to cash.

The Defensive Destination

Any sleeve that fails its trend test moves that sleeve's entire weight to intermediate-duration Treasuries (IEF). Sleeves fail independently, so defensive exposure accumulates in steps rather than all at once. Triad has held some Treasury exposure in roughly 41% of months since 1980, averaging about 16% of the portfolio, and has been fully defensive in only 8 months across 46 years.

That gradualism is the point. Triad is rarely all-in and rarely all-out.

How Triad Holds: Nominal Weights and Drift

Most tactical strategies reset to their target weights every single month. Triad does not.

The 30% / 35% / 35% split is nominal rather than fixed. Once a sleeve is established, it is left alone to compound with whatever it holds. A sleeve is traded only when its own momentum signal changes what it should own, and when that happens the sleeve keeps its own accumulated value rather than being resized against the others. Winners are allowed to run.

To stop any one sleeve from quietly taking over the portfolio, a single guardrail applies: if any sleeve drifts more than five percentage points away from its nominal weight, the whole portfolio resets to 30/35/35. Over 46 years that guardrail has triggered 30 times, a median of about a year apart, with one stretch of more than six consecutive years in which it never triggered at all.

The practical effect is that roughly half of all months require no trading whatsoever. Under a conventional monthly rebalance, nearly every month demands at least a small adjustment to every position.

The guardrail matters more than it might appear. Without it, the fastest-compounding sleeve grows to dominate the portfolio, and by the early 2000s Triad would have become an 80%-plus bet on a single sleeve. Headline returns would look better. Risk-adjusted returns and drawdowns would be materially worse, and the strategy would no longer be diversified in any meaningful sense. Letting winners run is valuable; letting them run unchecked is not.

Key Enhancement: Smart Leverage (Triad 135 and Triad 170)

The base Triad strategy is unleveraged. Two leveraged variants apply Smart Leverage to the U.S. large-cap sleeve only:

• Triad 135 substitutes a 2X U.S. large-cap position, for up to 135% total notional exposure.
• Triad 170 substitutes a 3X position, for up to 170%.

Smart Leverage is opportunistic rather than permanent. It arms only after U.S. large cap has suffered a meaningful drawdown, deploys only if momentum has genuinely turned back up, and exits on either a momentum reversal or a hard time limit. Across the backtest it has been deployed in about a quarter of all months, in 19 separate episodes averaging around eight months each.

Sleeves 1 and 3 are never leveraged. Leverage is applied to the single sleeve whose behavior is best understood and most liquid, during the specific conditions where recovery odds have historically been most favorable.

Performance Highlights

January 1980 through September 2026, net of trading friction:

	CAGR	Max Drawdown	MAR
Triad	+14.9%	-13.8%	1.08
Triad 135	+16.0%	-13.8%	1.16
Triad 170	+17.2%	-13.8%	1.24
S&P 500	+12.0%	-51.0%	0.24

Characteristics worth noting across the base strategy's 46-year record:

• 44 of 46 calendar years positive. The two exceptions were 1994 at -2.9% and 2015 at -4.3%.
• Best year 1999 at +49.1%.
• Drawdown protection. In the 192 months when U.S. large cap fell, it averaged -3.6% while Triad averaged -0.5%. In large cap's ten worst months, it averaged -12.7% against Triad's -2.8%.
• Maximum drawdown under 14%, against roughly -50% for the S&P 500 over the same period.

All three variants share the same maximum drawdown because it occurred in March 1980, when Smart Leverage was dormant and no leverage was deployed. That is a fact about when the worst month happened, not a claim that leverage is free: the cost of leverage shows up in the Ulcer Index and UPI columns, which worsen as leverage rises.

The S&P 500 row is the comparison that matters most. Triad earned meaningfully more per year over the period, but the gap in how it earned them is wider still than the gap in returns.

Portfolio Characteristics

• Concentrated but diversified. Typically three or four holdings at a time, drawn from three uncorrelated sleeves.
• Low trading frequency. Roughly half of all months require no trades at all. A given sleeve changes what it holds about every five months on average.
• Gradual defensiveness. Sleeves retreat to Treasuries independently, so risk comes off in stages rather than in a single binary switch.
• Best suited to tax-deferred accounts. This one is worth being direct about. Although Triad trades infrequently, the trades it does make are mostly short-term. Roughly 9% of sleeve exits are held long enough for long-term capital gains treatment. Letting weights drift reduces the number of taxable events considerably; it does not convert short-term gains into long-term ones. In a taxable account, plan accordingly.
• Fully mechanical. Every allocation follows from published rules with no discretionary override.
• Scalable. All positions are liquid, exchange-traded funds.

Who It's For

Triad is designed for investors who want:

• A genuine alternative to 60/40 rather than a rebranded version of it.
• Meaningful equity-like returns with drawdowns closer to a conservative balanced portfolio.
• Diversification across return streams that do not all depend on the same economic conditions.
• A rules-based process with no market-timing judgment calls.
• Low maintenance, with roughly half of months requiring no action at all.
• Optional tactical leverage during high-conviction recovery periods, via Triad 135 or Triad 170.

It is likely a poor fit for investors who need current income, who cannot tolerate holding commodities or managed futures, or who are investing in a taxable account and are highly sensitive to short-term capital gains.

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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. Portions of the long-term 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