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However many assets you choose to hold, add an equal number of money-market assets. That is, if you choose to buy 3 assets, then to your culled population, add another 3 assets, all consisting of money-market. Then rank the whole lot. If your top 3 assets are X, Y, and money market, then buy that mix. If an equity asset cannot outperform money-market, don't buy it. This means you will have to construct an asset consisting of the compounded effect of money-market, which is a great thing to have in your toolbox anyway. Some professionals do not like holding money-market assets in a client's portfolio for marketing reasons. If a client sees a large portion of his assets in cash, he's inclined to find something else (usually wrong) to buy with it. There are also some programs that rank say 15 assets side-by-side with 15 money-markets. Then if the market tanks, you will probably be in mostly cash before that happens. That is a fairly conservative way to go, usually producing acceptable, albeit low, returns, but with very low drawdowns. Risk-averse types take notice.

How frequently do you look to change the assets? Recasting the investments everyday is not typically the best choice (as you will choose a lot of one-day-wonders), but there is a sweet spot that is robust. Once you get beyond the sweet spot, performance does degrade.  Interestingly, on some programs, recasting as infrequently as monthly isn't all that bad. That is, it still beats the S&P hands down, and a whole lot of hedge funds to boot.
A variation on the question as to how many assets to hold, is the percentage allocation among those held assets. Equally weighting the allocations may be the first choice to consider, but it is certainly not the last. Then you have to deal with rebalancing the equity among the assets and the frequency of that rebalancing. The academic literature just on the frequency of rebalancing is quite substantial.  In other words, you can use academic literature to shortcut some research, but expect to be doing a fair amount of reading.
If you consider a hedged strategy, you have to choose whether you are going to hedge initial equity only (never readjusted for equity changes), a full hedge (adjusted daily for all changes), or somewhere in-between. The frequency of hedging is also a variable that should be tested. Upon doing so you will also find a sweet spot that is robust. Readjusting the hedge can also be subjected to an on-off switch. That is, if your strategic overlay says that equities look weak, the switch forces you to go to a fully hedged condition from less so.  Then consider the hedging vehicle:  will you use an inverse fund or derivatives?  Think of the hedging vehicle as insurance, and the price of that insurance determined by the leverage of the hedge.  Thus, an inverse fund (preferred by individuals) is high-priced insurance, and derivatives (favored by the pros) are inexpensive.  Both work equally well, but lower costs produce higher returns.

What is best depends on the yardstick used by the investor. The investor may seek to maximize returns, minimize drawdowns, maximize the ratio of the two, or some other statistic. Success is absolutely achievable. For example, it is certainly possible to create a program in which the compound annual rate of return exceeds twice the maximum drawdown, or with a Sharpe Ratio north of 2.

Given all of the degrees of freedom discussed above, it would certainly be naive to expect a simple four-sector program chosen on the basis of relative strength to produce hedge fund returns. It is wrong for the abstract to imply that investment success cannot be achieved. However, the author is right in that the typical investor cannot use such a simple strategy to produce superior performance. But that's not because of a flawed concept.  Rather it's because the typical investor is not up to the task of doing the research necessary.

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