- On raw returns, Buy & Hold wins: 10.8% a year, turning $100,000 into $3.09 million over 33 years. None of the six momentum strategies beats it.
- On risk-adjusted returns, the slow filters win: the golden cross (Dual SMA 50/200) earns almost as much (10.3%) with a worst year of −6.4% versus the market's −36.8%.
- The 200-day moving average cuts the maximum drawdown by well over half: −22% versus −55% for Buy & Hold.
- Fast indicators (MACD, RSI, short Donchian) trade far too often — up to 448 trades — and end with 5–6 times less capital.
- The verdict: momentum doesn't make you richer, it makes you suffer less. It's insurance, not a money machine.
This is a question investors ask all the time — more so than traders. As usual, we'll let the numbers answer it. First, though, let's define our terms. By Buy & Hold we mean putting all available capital into an asset at a given point in time and making no further trades all the way to the present day. By momentum strategy we mean moving in and out of the market based on entry and exit signals generated by specific conditions or indicators.
For the test we used six of the most common strategies:
- SMA 200 — go long when price is above its 200-period moving average;
- Dual SMA 50/200 — the classic golden cross: go long when the 50-period average is above the 200-period one;
- 12-month ROC — go long when the trailing 12-month return is positive;
- MACD (12, 26, 9) — go long when the MACD Line is above the Signal Line;
- RSI (14) > 50 — go long when RSI is above the 50 threshold;
- Donchian 50/25 — enter on a breakout above the 50-day high, exit when price closes below the 25-day low.
We used all the historical data available to us: from 1993 through today, 2026, on the benchmark asset par excellence, the SPY ETF (S&P 500), starting with $100,000 and identical rules for every strategy: no leverage, no short selling, realistic costs on every trade and no hindsight.
The two curves at a glance
Before the details, here is the heart of the study: $100,000 invested in the S&P 500 since 1993, Buy & Hold versus the best slow-filter strategy, the Dual SMA 50/200 golden cross. On top, capital growth (log scale); below, how much pain it took to get there.
Buy & Hold (gray) finishes higher — 10.85% a year, roughly $3.13M — but the golden cross (green) stays very close (10.29% a year) with far fewer trades. Note: the scale is logarithmic, so the same vertical distance represents the same percentage change.
This is the pain chart: how far below the previous peak you are, day by day. Buy & Hold plunges to −55.2% in 2008-2009; the golden cross bottoms out at −33.7%, and its worst year is just −6.4% versus the market's −36.8%. Same gain, roughly half the pain.
When a momentum strategy exits the market, the capital doesn't sit under the mattress: in the test it earns the yield of a 3-month US Treasury bill (T-Bill), the classic cash "parking spot." Without this detail, the comparison would be unfairly stacked against strategies that spend a lot of time out of the market.
The verdict in four boxes
The full leaderboard
Each row is a strategy. The most important columns are the annual return, the Sharpe ratio (return relative to risk) and the max drawdown (the worst crash you would have had to sit through).
| Strategy | What it does | Annual return | Volatility | Sharpe | Max drawdown | Worst year | % invested | No. of trades | Beats mkt | $100k becomes… |
|---|---|---|---|---|---|---|---|---|---|---|
| Buy & Hold | Buy and hold: always invested, does nothing. | 10.8% | 18.6% | 0.51 | −55.2% | −36.8% | 100% | 0 | — | $3.09M |
| SMA200 | In when price is above its 200-day average. | 9.0% | 12.0% | 0.57 | −22.3% | −14.3% | 75% | 107 | 15% | $1.77M |
| Dual SMA 50/200 ★ | In when the 50-day average crosses above the 200-day (golden cross). | 10.3% | 13.7% | 0.60 | −33.7% | −6.4% | 75% | 16 | 21% | $2.61M |
| ROC 12m | In when the market is up over the past 12 months. | 10.1% | 13.7% | 0.58 | −31.2% | −16.9% | 79% | 49 | 18% | $2.47M |
| MACD (12,26,9) | In/out on crossovers of two fast averages. | 5.4% | 11.0% | 0.30 | −33.4% | −11.8% | 51% | 358 | 29% | $577k |
| RSI(14)>50 | In when the Relative Strength Index (RSI) is above 50. | 5.3% | 11.0% | 0.29 | −43.3% | −26.0% | 68% | 448 | 21% | $560k |
| Donchian 50/25 | In on new 50-day highs, out below 25-day lows. | 5.2% | 9.6% | 0.31 | −34.1% | −22.6% | 55% | 87 | 15% | $549k |
CAGR is the compound annual growth rate: the constant rate that, applied every year, takes the starting capital to the ending capital. The Sharpe ratio measures how much return (above the risk-free rate) you earn for each unit of risk taken: for the same gain, the strategy that swings less has a higher Sharpe. It's the number that separates "making a lot" from "making it well."
$100,000 turns into how much?
The most tangible question: what the starting capital would have grown to after 33 years with each strategy.
Return vs. pain
This is the key chart of the study. Higher = more gain. Further left = less suffering (a milder worst crash). The sweet spot is the top-left corner: plenty of return, little pain.
Who delivers the best risk-adjusted return
The Sharpe ratio rewards those who make money "with a calm stomach." Here the slow filters beat the market; the jittery indicators fall behind.
How much you can lose
Two measures of pain: the worst crash (from peak to the subsequent trough) and the worst year. This is where slow momentum shows its real value.
Drawdown is the decline in capital from its previous peak: if the account goes from 100 to 45, the drawdown is −55%. For a real-world investor it often matters more than return, because it's the number that decides whether you can stick with the strategy psychologically or sell at the worst possible moment. And a −55% loss then requires a +122% gain just to break even.
Three lessons from the data
1 · Momentum doesn't make you richer, it makes you suffer less
Buy-and-hold returned 10.8% a year ($100k → $3.09M): nothing beats it on raw returns. But the price was a −55% crash and a −36.8% year. The best momentum strategies earn almost as much (Dual SMA: 10.3%) with losses cut in half and a worst year of just −6.4%. Momentum is insurance, not a money machine.
2 · Simple beats complicated
Slow, "boring" indicators (200-day average, 50/200 crossover, 12-month return) improve the risk/return profile and stay close to the market. Fast, jittery indicators (MACD, RSI, short breakouts) trade too much — up to 448 times — get whipsawed by false signals and end up with a final capital several times smaller than the slow filters. More clicks don't mean more money: often the opposite.
3 · You win rarely, but when it really counts
Momentum strategies beat buy-and-hold in only 15–30% of years. Most of the time — in calmly rising markets — they lag a little, because they're sometimes "out" while the market climbs. They make it all back (and more) in the big crashes, staying safe while everyone else sinks. You pay lots of small "deductibles" to avoid the two or three real disasters.
Whipsaw is the enemy of fast indicators: the market oscillates around the signal threshold, the strategy keeps jumping in and out, and every round trip pays costs and small losses. That's why MACD and RSI, with 358 and 448 trades, end up with a fifth of the capital of the golden cross, which made just 16 trades in 33 years.
So, which one should I choose?
Buy and hold, if…
- you have a very long horizon (10–20+ years)
- you have the stomach to watch your account get cut in half without selling
- you want maximum simplicity and lower taxes and costs
- you don't check your portfolio every day
A slow momentum filter, if…
- a −50% drop would make you panic-sell (the real risk)
- you prefer a smoother ride, even at the cost of earning a bit less
- you're fine making a few trades a year and "lagging" in calm bull markets
- you use the slow versions (200-day, 50/200, 12-month) and avoid hyper-reactive indicators as a standalone system
How we ran the numbers
In plain English. Data: SPY, the S&P 500 ETF, with dividends reinvested, from January 1993 to today. Identical rules for everyone: $100,000, either in (stocks) or out (cash earning the 3-month Treasury bill rate), no leverage, no short selling. Methodological honesty: the signal is read at yesterday's close and executed today (no "hindsight"), and every position change pays a small, realistic cost. The study comes from an analysis notebook built in Python on real data.
Conclusions
The opening question was "Buy & Hold or momentum?" and the numbers answered it precisely: it depends on which enemy you want to fight. If your enemy is missing out on returns, Buy & Hold remains unbeaten. If your enemy is the crash that makes you sell at the worst possible moment — and that is the real enemy for most investors — a slow momentum filter buys protection at a reasonable price. What the data rejects outright is the jittery middle ground: constantly jumping in and out on fast indicators, the most effective way there is to turn a potential $3 million into half a million.
This article is also available in Italian.