Earn 15% a Year with a “No-Brain” Strategy? The Case for GEM

19 min readSep 22, 2025

Let’s get one thing out of the way: I’m not a financial guru, and I don’t pretend to have all the answers. What I do have is curiosity — and over time, that curiosity led me to gain some knowledge which, in my opinion, is worth sharing. One of the investing strategies I’d like to tell you about is Global Equity Momentum (GEM).

The idea is this: once a month, you check which side of the market is doing better — stocks or bonds. You stick with the stronger one. That’s it. No complicated formulas, no insider knowledge, no predicting interest rates or global events. Just a repeatable rule. (And don’t worry if terms like “ETF” or “bond” sound unfamiliar — I’ll explain them clearly later in the article.)

Here’s why it’s worth your attention:

Historically, GEM delivered average returns of around 15% per year.
The biggest loss along the way was about 18%, while stock markets have sometimes crashed by 50% or more.
Saving $12,000 a year for 40 years, a passive portfolio might leave you with $864,000; GEM would have grown to about $3 million.
Starting retirement with $1M and withdrawing 4% a year, a passive investor would eventually run out of money. GEM? It still left over $5 million after 40 years.

This isn’t magic. The results depend heavily on costs, taxes, and — perhaps most importantly — on whether you can stick to the rules when markets get shaky. But that’s also the beauty of it: a “no-brain” strategy doesn’t ask you to outsmart Wall Street. It just asks you to follow the plan.

In the rest of this article, I’ll show you:

how momentum works,
why it can beat a classic buy-and-hold portfolio,
what pitfalls to watch out for,
and how to apply it in practice with a few simple tools.

This is a long and detailed article, but I’ve also prepared a summary for those short on time. However, I highly recommend reading this entire piece to fully grasp the nuances and benefits of the GEM strategy.

What Is GEM and How Does Momentum Work?

The name Global Equity Momentum (GEM) might sound like something cooked up in a Wall Street lab, but it’s refreshingly simple. GEM is just a set of rules that tell you where to put your money each month: in stocks (shares of companies) or in bonds (essentially loans to governments or large corporations). Once you’ve set those rules, you don’t need to think and you just stick to the plan.

Stocks vs. Bonds — the two sides of the coin

Stocks (also called equities) represent ownership in companies. If the company grows and earns more, your piece of the pie grows too. But stocks can also fall sharply when the economy stumbles.
Bonds are loans you give to governments or companies. In exchange, they pay you interest. They usually grow more slowly than stocks, but they’ve historically been seen as a “safe haven” — when markets tumble, investors often run to bonds for stability.

The “momentum” idea

Momentum is the observation that what has been doing well lately often keeps going for a while. If stocks have been climbing steadily, they’re more likely to keep climbing. But when the tide turns and markets start falling, GEM doesn’t sit there and wait. It shifts into bonds, the safer side of the coin, until stocks regain their strength.

Instead of guessing or reacting emotionally, GEM asks one simple question each month: which side is stronger right now? If it’s stocks, you’re in stocks. If markets are sliding, you move into bonds. That’s the entire playbook.

Why it matters

This small, rules-based switch — checked just once a month — has historically meant the difference between living through gut-wrenching 50% stock market crashes and keeping the worst losses closer to 18%. It also meant compounding returns at roughly 15% a year instead of the ~11% that the U.S. market delivered.

The role of ETFs

How do you actually buy “the stock market” or “the bond market”? That’s where ETFs (Exchange-Traded Funds) come in. Think of an ETF as a basket of investments you can buy with a single click. One ETF might hold hundreds of global companies, while another holds government bonds. By using ETFs, you don’t need to pick individual companies or worry about how to buy bonds directly.

Don’t worry if ETFs are new to you — later in this article, I’ll walk through specific examples and show you exactly how they fit into the GEM strategy.

Myth-Busting Sidebar: Do I Need to Watch the Market Every Day?

Many people imagine investing means staring at flashing charts, tracking breaking news, and making split-second decisions. GEM proves the opposite. The whole system requires just one decision per month: stocks or bonds. That’s it. It’s not about speed or constant attention — it’s about discipline.

What the Numbers Say: Momentum vs. Passive Investing

It’s easy to dismiss a strategy until you see what the math looks like over decades. Researchers have backtested GEM all the way back to the 1950s, and the results show how powerful even a small rule-based adjustment can be.

Building wealth while saving

Take the case of someone saving $12,000 a year for 40 years. With a classic passive portfolio, that nest egg would have grown to about $864,000. Using GEM, the outcome was closer to $3 million. The difference wasn’t about taking huge risks — it was about compounding steady returns while avoiding the most painful crashes.

Why big crashes matter more than you think

On paper, a 50% market drop sounds like just another bump in the road. But let’s do the math: if an index climbs from 1,000 to 8,000, that’s a 700% gain. Now cut it in half — a 50% crash — and suddenly you’re back to 4,000. Your 700% return shrinks to just 300%, and you need another 100% gain just to recover. That’s the silent killer in investing: losses hurt far more than the same percentage gains help.

Crisis after crisis

If you look at long-term charts of the S&P 500, the pattern is brutal. The dot-com bust (2000–2003) wiped out nearly half of market value. The global financial crisis (2008) saw stocks fall over 50%. Even the COVID crash of 2020 sliced markets by more than 30% in weeks. Each time, GEM’s rules kicked in: when markets slid, the system shifted into bonds — the safe haven. That simple switch kept losses closer to 15–18%, making recovery much easier.

Bull and Bear markets trough year (advisorperspectives.com)

The smoother path

Numbers are one thing, but the picture below says it all. The blue line is Global Equity Momentum (GEM); the orange line is the GAA benchmark portfolio (45% U.S. stocks, 28% international stocks, and 27% bonds). Both start at the same point back in 1950. By 2018, GEM has pulled far ahead — not in a sudden leap, but by steadily compounding over decades.

GEM vs. GAA benchmark (optimalmomentum.com/)

If you look at the numbers, the difference is striking:

GEM CAGR (1950–2018): ~15%
GAA Benchmark CAGR: ~11%

That 4 percentage-point gap may not sound dramatic, but over nearly 70 years it turns into a massive wealth difference. And notice how the GEM line is smoother — the drawdowns are shallower, recoveries quicker. That’s the whole advantage of a momentum-based switch: less time spent climbing out of deep holes, more time letting compounding do the work.

The difference shows up most clearly in the worst crashes. The GAA benchmark suffered a maximum drawdown of about –41.2%, while GEM’s deepest loss was closer to –18.8%. Both are painful, but the gap is huge: one wipes out nearly half of a portfolio, while the other is a setback that’s much easier to recover from.

The Gap Between Gross and Net Returns — Why Fees and Taxes Matter

The illusion of “perfect backtests”

When you see a backtest chart showing millions piling up, it’s tempting to believe those numbers are what you’ll actually get. But reality has a way of shrinking results. Fees, transaction costs, and especially taxes quietly eat away at performance.

In the GEM backtest, the raw numbers looked stunning:

Without costs: GEM compounded into roughly 20 million (over 50 years, in real terms).
After ETF fees & commissions: results fell to about 11 million.
After taxes (Poland example): the number dropped again to ~8.5 million.
For comparison, a passive portfolio over the same period ended near 3 million.

The lesson: GEM still outperforms, but the gap between “gross” and “net” is enormous. Costs are not a rounding error — they’re the difference between dream returns and actual results.

Quantifying turnover and fee drag

Momentum strategies like GEM have higher turnover than passive investing, because positions can change monthly. That means:

More trades → more commissions and spreads.
More rebalancing → higher risk of slippage.
More taxable events in regular accounts → higher tax bills.

That’s why total expense ratio (TER) and trading costs matter so much. An ETF charging 0.2% vs. 0.5% TER may look like a small difference, but compounded over decades, it becomes a fortune.

Taxes and the role of accounts

Taxes are the silent killer of active strategies. Every time you sell in a regular account, you realize gains that get taxed. Over decades, that compounding penalty is devastating.

Tax impact on investment (manning-napier.com)

GEM works best in tax-privileged accounts f.e.IRAs and 401(k)s in the U.S., ISAs in the U.K., or other wrappers depending on the local system.

Put simply: the same strategy in a tax-advantaged account vs. a taxable account can mean millions of difference over a lifetime.

How to minimize cost leakage

A few practical steps can help keep more of GEM’s returns in your pocket:

Choose low-TER ETFs (broad market, highly liquid).
Consolidate trades.
Prefer accumulating ETFs (that reinvest dividends) if your tax regime penalizes distributions.
Leverage tax-advantaged accounts whenever possible.

Reality check

The GEM framework shines in theory because of its strong compounding edge. But to bring that edge into reality, investors must respect costs and taxes as central parts of the strategy. It’s not about finding the perfect signal — it’s about making sure what you earn doesn’t leak away before it compounds.

Which ETFs to Use — Constraints, Alternatives, and Practical Workarounds

Typical ETF selection checklist

Choosing ETFs for a rules-based strategy like GEM might sound straightforward — “just pick the world index and some bonds.” But in practice, the details matter. When selecting an ETF, it helps to check:

Geographic coverage (does it track U.S., global, emerging markets?)
Index provider (MSCI, FTSE, or S&P — definitions can differ subtly)
Domicile (for Europeans U.S.-domiciled ETFs trigger higher withholding taxes)
Total Expense Ratio (TER) (lower is almost always better for long-term compounding)
Replication method (physical vs. synthetic — physical is simpler and often preferred)
Liquidity & trading volume (to avoid big spreads)
Accumulation vs. Distribution (Accumulating grows your assets faster; distributing provides cash when you start withdrawing)
Currency (whether you want EUR, USD, or GBP exposure for your account and remember to minimize exchange costs).

I know it’s a lot to consider, but the good news is: once you’ve set your strategy and chosen your ETFs, you don’t need to think about it again. From there, it’s just a matter of sticking to your plan and letting your investments do the work.

Proxies for unavailable indices

Here’s the catch: in Europe, the “ideal” building blocks aren’t always available. The GEM documents highlight a big one:

There is no ETF in Europe for the ‘rest of world without USA’ — you must build it synthetically or use proxies.

In practice, that means you can’t buy a neat ETF that’s “everything but U.S. stocks.” Instead, you piece it together:

A global fund (like MSCI ACWI) minus a U.S.-heavy world fund (like MSCI World) → to isolate “rest of world.”
Or just approximate with MSCI Emerging Markets (EIMI.L) plus developed ex-US funds.

Another simple workaround I might suggest: instead of overweighting the U.S. via S&P 500, use MSCI World as your default “global equity” piece. It automatically balances exposure across developed markets, so you don’t end up 70% in the U.S. by accident.

A short table of common ETF substitutions

My proposition for ETFs Momentum strategy

Keeping It Real

ETF selection isn’t just about chasing the “perfect” index — especially in Europe, where the menu is more limited. The good news is that practical proxies exist, and GEM is robust enough to handle small differences. What matters most is consistency: pick a set of ETFs that cover your bases, keep costs low, and are simple enough to stick with.

How to monitor momentum?

Once you’ve chosen your ETFs, the next step is tracking them in a way that’s simple enough to stick with. For this strategy, I’m working with:

CNDX.L (U.S. tech via Nasdaq 100)
CBU0.L (long term U.S. bonds)
IWDA.L (developed markets, global)
EIMI.L (emerging markets)
IB01.L (short-term government bonds, our safe haven)

Option A: Spreadsheet (the minimalist version)

You don’t need a Bloomberg Terminal — a plain Google Sheet is more than enough. For each ETF, track just three things:

Ticker | Current Price | Price 12m Ago

Formula:

Momentum = (Current_Price — Price_12m_ago) / Current_Price

That’s it. Each month, you enter, and your sheet tells you which ETF has the strongest momentum. If stocks are stronger, you pick one of them; if bonds are winning, you move to your “safe haven.” Then you wait until next month. You always invest all your money, so if last month’s winner loses, you sell everything and switch to the new leader.

I’ve prepared a very simple spreadsheet where all you need to do is enter the Google Finance tickers of the ETFs you choose.

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How to find a ticker:

Search for the ETF name in Google, as shown in the example below.
Copy the ticker symbol that appears at the top of the page.
Paste it into the spreadsheet and remove any extra spaces.

Below, I’ve provided a link to the spreadsheet along with a step-by-step guide for finding tickers.

Google sheet GEM Tracker

Option B: Scrab (visual & automated)

If you’d rather see things visually, Scrab (the free version is more than enough) is a handy tool. It lets you build charts, track your ETFs, and monitor key metrics in one place. We could go into more detail in another article, but for now I’ll show you the features that let you track your GEM strategy on the free plan.

What is Scrab?

Scrab is an investment platform that makes fundamental stock analysis simpler and more accessible, whether you’re just starting out or already experienced. Beyond letting you check the basics, it gives you the ability to run backtests, create custom scoring models, and track a wide range of metrics across thousands of companies. It’s a handy tool for keeping your research organized, spotting trends, and making more informed investment decisions without getting bogged down in spreadsheets.

We could go into more detail in another article, but for now I’ll show you the features that let you track your GEM strategy on the free plan.

You can join to Scrab with: LINK

Step 1: Enter Master Chart

Step 2: Add your ETFs and metric “price”

Step 3: Change for % view and choose 1Y period

Step 4: Save for next month

And that’s it! I really like this tool for fundamental analysis because it lets me add multiple metrics and track a handful of stocks.

Investing Psychology: Why We’re Often Our Own Worst Enemy

The biggest threat to any investment strategy isn’t usually the market — it’s us. If GEM were just about math, we’d all be millionaires by now. Crashes and rallies come and go, but how we react to them often determines our results. Many investors panic when markets fall, selling at the worst moment, only to buy back later when prices are already high. It’s not bad luck — it’s human nature.

Fear in a crisis

When the market drops by 40%, it doesn’t feel like a number on a chart — it feels like your future disappearing. Even if history shows markets recover, in the moment our brains scream: “Do something! Get out before it goes to zero!” This instinct may have helped our ancestors avoid predators, but in investing it often does more harm than good.

Why smoother strategies help

This is where systems like GEM shine. A maximum loss of –18.8% is still uncomfortable, but it’s much easier to live through than –41.2%. Smaller drawdowns don’t just protect your portfolio — they protect your nerves. By limiting the emotional rollercoaster, a rules-based approach increases the odds that you’ll actually stick with it long enough to benefit from compounding.

Rules vs. instincts

GEM is what professionals call a systematic strategy. That means it’s driven by rules, not feelings. The idea is simple: take the decision-making out of the heat of the moment. Instead of reacting emotionally, you follow a pre-set plan.

But here’s the catch: even when the rules are clear, you still need to decide whether to trust them. Many people struggle with “handing over” control to an algorithm, because it feels unnatural to let a set of rules overrule our instincts.

People don’t like handing decision-making to a procedure or machine … we resist because our brain can analyse the world more broadly.

In other words, we feel smarter than the rule. The trouble is, overriding rules tends to happen at exactly the wrong times — during crises or euphoric peaks.

Behavioral traps that destroy returns

Loss aversion: the pain of losing is about twice as powerful as the pleasure of winning, which makes us panic-sell too soon.
Overconfidence: after a streak of wins, we believe we can “outsmart” the strategy.
Recency bias: a few bad months and we’re convinced the system “stopped working.”

Daniel Kahneman warned about these biases decades ago. Momentum investing doesn’t erase them — it just exposes how hard they are to manage.

The risks you need to respect

Even with discipline, the system itself carries risks:

Regime risk: periods when momentum lags (e.g., during sharp V-shaped recoveries).
Concentration risk: U.S. markets dominate global indices, which can skew exposure.
Liquidity risk: thin ETFs can have wide spreads that eat into returns.
Tax & fee risk: high turnover means higher costs if you don’t optimize execution.

Preparing yourself

Perhaps the hardest truth: there will be stretches where GEM looks broken. The difference between investors who benefit from the compounding edge and those who quit comes down to preparation. If you expect those periods in advance, you’re more likely to stick it out.

Why These Five ETFs?

A GEM strategy doesn’t need dozens of funds — just the right ones. This mix of three equities and two bonds provides both global reach and defensive ballast.

CNDX.L (Nasdaq-100)

This is the pure play on U.S. technology and innovation. Companies like Apple, Microsoft, Amazon, and Nvidia dominate this index. They also tend to dominate performance in momentum-driven bull markets. By including Nasdaq, we make sure the strategy can latch onto the strongest secular growth trends when they’re in full swing.

CBU0.L (U.S. Treasuries 7–10 years)

While equities can deliver growth, they also bring volatility. CBU0 is different: it’s an intermediate U.S. Treasury bond ETF, focused on 7–10 year maturities. These bonds often rally when markets turn risk-off, providing ballast to the portfolio. In GEM, CBU0 is a first line of defense — less flashy than stocks, but crucial when momentum turns against risk assets.

IWDA.L (MSCI World)

One of the biggest criticisms of “global investing” is that it often means “mostly U.S.” IWDA solves this. It tilts exposure towards developed markets outside the U.S. — Europe, Japan, Australia. It ensures GEM isn’t just betting on one country but can pick up on trends elsewhere in the developed world.

EIMI.L (MSCI Emerging Markets)

Emerging markets often move to their own rhythm. When U.S. and European markets stall, China, India, or Brazil can sometimes lead. By including EIMI, GEM gains access to those different cycles — a way of adding diversification and optionality to the momentum race.

IB01.L (U.S. Treasuries 0–1 years)

This is the ultimate safe harbour. IB01 tracks ultra-short U.S. Treasuries with maturities under one year. It’s as close to “cash” as you get in ETF form — extremely stable and liquid. In GEM, IB01 is where capital parks when both stocks and longer bonds look unattractive. Not meant to “win,” but to preserve.

With this set of ETFs, I accept a higher potential drawdown, but they should also offer higher potential gains.

What the backtest shows

I ran a backtest in Scrab from 2020 to today (limited by the availability of historical prices for these ETFs). GEM was compared to the S&P 500 (^SPX):

In terms of pure returns, GEM looks very similar — this is because the S&P 500 led the global market for much of this period. What’s interesting, though, is that we can also see period where GEM truly shined:

Why the “smoother ride” matters

The chart makes it obvious. In 2022, while equities plunged, GEM rotated into IB01 and went flat. No drama, no big losses — just stability. By mid-2023, when stocks regained strength, GEM rejoined the rally. The S&P investor endured a brutal rollercoaster; the GEM investor stayed calm.

That difference — cutting volatility and making losses shallower — is what keeps real people invested through full cycles. And that, in the end, is how compounding works its magic.

How to Get Started: A Practical Checklist for Readers

By now, you’ve seen the math, the ETFs, and the psychology. The last step is turning all that into a personal action plan. Here’s a checklist to guide you from curiosity to implementation.

Step 1: Collect your ingredients

Pick a small set of ETFs that cover the essentials. A sample starter pack could be: CNDX.L, IWDA.L, EIMI.L, CBU0.L, IB01.L.

Check their key details in the fact sheets: Total Expense Ratio (TER), domicile, replication method, and currency.

Step 2: Build a simple tracker

Don’t overthink it. All you really need is a way to check prices now versus 12 months ago.

A spreadsheet works fine — columns: Ticker | Current Price | Price 12m Ago | Momentum %.
Or, use a free tool like Scrab to set up a chart that compares ETFs by percentage growth.

Step 3: Open an investing account

Choose a broker with low commissions and tight spreads.

Where possible, use tax-advantaged accounts (like IKE/IKZE in Poland, or ISA/IRA elsewhere) to protect returns from unnecessary leakage.

Step 4: Start small

You don’t have to commit everything. You might decide to buy hand picked stocks with 20% of your portfolio and keep the other 80% in a simple, passive “no-brain” strategy. That way you learn the rules, build expertise, and still sleep at night.

Minimum Monitoring Rules

Check signals once a month.
Trade only when the signal changes.
Log every move (date, ticker, cost, rationale).
Review your results quarterly, not daily.

Conclusion: Momentum Works — But Only with Good Execution

The story of GEM is simple: over decades, a rules-based momentum framework has outperformed traditional passive portfolios. It has done so both in the accumulation phase — when you’re building wealth — and in the withdrawal phase — when you’re living off it. The numbers are compelling, but they don’t tell the whole story.

The difference between theory and reality comes down to three things: fees, taxes, and behaviour. Without careful attention to trading costs and account structures, much of the compounding advantage disappears. And even with the perfect setup, the hardest part is sticking with the rules when markets get rough. As the GEM materials remind us: investing is not a shortcut to riches — it is a tool for managing savings; have a plan and stick to it.

That’s why I think of GEM not as a holy grail, but as one tool in the toolbox. For many, a passive core portfolio is still the anchor. GEM can sit alongside it — maybe 20%, maybe 80% — offering a systematic edge without replacing simplicity.

I’ll be sharing more: stock analyses, strategy explainers like this one, and practical articles that connect research with real-world investing.

Momentum works — but only if you work the system with discipline.

And just to be clear: I’m not a financial advisor. I’m simply someone curious about investing, testing strategies, and sharing what I learn along the way. If it helps you avoid mistakes, or see the markets in a new way, then this project is already worth it.

Appendices & Resources

To keep everything organized, here’s a single place to find the tools, references, and definitions mentioned throughout the article.

Appendix A — Spreadsheet Tracker Template

A simple Google Sheets file for tracking ETF prices and momentum signals. HERE

Appendix B — Track GEM Strategy with Scrab

Use Scrab to follow your GEM strategy: add your ETFs, monitor key metrics, visualize momentum, and track performance each month.

Appendix C — ETF Fact Sheets

Before choosing any ETF, review its official fact sheet. Pay attention to:

TER (Total Expense Ratio)
Domicile (Irish UCITS often most efficient for Europeans)
Replication method (physical vs synthetic)
Dividend policy (accumulating vs distributing)

I’ve gathered for you fact sheets for our case GEM ETFs: LINK

Appendix D — Glossary

Momentum: Investing in assets that recently outperformed, expecting the trend to continue.
ETF (Exchange Traded Fund): A fund that trades on an exchange like a stock but usually tracks an index (e.g., S&P 500, MSCI World).
Bonds: Debt instruments issued by governments or companies. Investors lend money in exchange for fixed interest payments and repayment at maturity.
Stocks (Equities): Shares of ownership in a company. Their value reflects the market’s expectations about the company’s future profits.
Accumulating ETF: An ETF that reinvests dividends back into the fund automatically, growing value over time without cash payouts. Often more tax-efficient during the accumulation phase.
Distributing ETF: An ETF that pays out dividends directly to investors, providing cash flow but possibly less tax-efficient if you don’t need the income.
TER (Total Expense Ratio): Annual percentage fee charged by the ETF provider.
Domiciliation: The ETF’s legal home. For EU investors, Irish UCITS funds usually reduce withholding taxes.