davesaint86
726 posts
msg #92112
- Ignore davesaint86 |
5/5/2010 11:20:49 AM
I can move in and out of my 401k fund selections every 15 days and my wife's is every 30 days.
Dave
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Kevin_in_GA
4,599 posts
msg #92114
- Ignore Kevin_in_GA |
5/5/2010 11:25:28 AM
I can rebalance mine at any time or frequency (at least as far as I know). To date I have not done it more than once a quarter, so I may be under some restrictions that I simply haven't violated yet.
That being said, the idea is sound, and can be used in any trading account. ETFReplay.com has shown that of the three frequencies for rebalancing, monthly consistently wins but quarterly usually is not that far behind.
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Kevin_in_GA
4,599 posts
msg #92115
- Ignore Kevin_in_GA |
5/5/2010 11:27:16 AM
My interest is obviously different, I live in Europe, so I'm looking more for a strategy that is low time consuming for a larger portfolio .....
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The size of the portfolio, or the number of stocks? You should only have as many stocks as you need to meet your financial objectives, no more. If you can meet them with once a month rotation between 3-6 stocks, why make it more complicated?
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cwn6161
40 posts
msg #92123
- Ignore cwn6161 |
5/5/2010 12:45:10 PM
Just to double check Kevin, on the last trading day of the month, you will run the filter to see for a new #1 ETF. If the ETF is the same, you stay in it. If it's different, you sell your old ETF and buy the new ETF, all on the last trading day. Is this correct?
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Kevin_in_GA
4,599 posts
msg #92124
- Ignore Kevin_in_GA |
5/5/2010 12:58:10 PM
Yes, that is correct. A very simple approach that has consistently beaten the market over the past seven years.
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davesaint86
726 posts
msg #92125
- Ignore davesaint86 |
5/5/2010 1:05:15 PM
I just want to check Kevin you would still buy the highest Alpha ETF even if it look's like we are turning into a downtrend. We can use May 1st for example. This is why I posted your old filter it seems like another indicator is needed. You can see that your old filter I posted is showing sell signals on the highest Alpha ETFs.
Thanks,
Dave
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Kevin_in_GA
4,599 posts
msg #92126
- Ignore Kevin_in_GA |
5/5/2010 1:14:24 PM
just want to check Kevin you would still buy the highest Alpha ETF even if it look's like we are turning into a downtrend. We can use May 1st for example. This is why I posted your old filter it seems like another indicator is needed. You can see that your old filter I posted is showing sell signals on the highest Alpha ETFs.
Thanks,
Dave
+++++++++++++++++
These two filters can both be correct, but on different timeframes. The 401k filter (for lack of a better term) is designed to show relative strength of a given ETF over a 1-month and 3-month timefame. The purely price filter simply uses a prior low as a sell trigger - if the current price drops below the lowest prior low over a specific time period, you sell. One can use these in conjunction, but then this new combination would need to be backtested again to see if the additional indicators made any real contribution over the original filter.
My goal in writing the shorter 401k filter was to create a simple and effective investment allocation tool that could be used with longer term investment accounts and minimal effort. The underlying prinicples can be used for short-term trades as well.
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davesaint86
726 posts
msg #92129
- Ignore davesaint86
modified |
5/5/2010 2:06:07 PM
Thanks Kevin!
I have one more question. Below is your ETF list that maps to typical 401K fund selections. The highest Alpha ETF at the end of February was IWM. The highest Alpha ETF at end of March was IWM. So based on your filter you would continue holding IWM until the end of the April and then run the filter to see what the highest Alpha ETF is at the top of the list. If it's different than IWM (say SHY) you would sell IWM and purchase SHY. So if a downturn started on April 16th and if April turns out to be a bad month for IWM I would assume you would follow the rules and still hold IWM to the end of the month. Am I correct? As a conservative strategy I wonder what is the difference in ROI would be if you use your filter during the "so-called" best six months Nov - April time period and in SHY the worst so-called six months time (May-Oct) period.
Thanks,
Dave
US Large Cap - SPY
US Large Cap Value - VTV
US Large Cap Growth - IVE
US Small Cap - IWM
Emerging Markets - EEM (although VWO is a better ranked ETF with a lower expense ratio)
Bond Fund - BND
Stable Income - MBB or IEI
Cash Equivalent - SHY
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Kevin_in_GA
4,599 posts
msg #92131
- Ignore Kevin_in_GA
modified |
5/5/2010 2:37:09 PM
The backtesting has you hold the ETF until the end of the month, regardless of what happens during the month.
Guess what?
Since Jan 2009 it has returned 66.8% versus 33.8% for the SPY.
Since Jan 2008 it has returned 69.8% versus -15.4% for the SPY.
Since Jan 2007 it has returned 125.5% versus -11.1% for the SPY.
Since Jan 2006 it has returned 182.4% versus 3.0% for the SPY.
Since Jan 2005 it has returned 250.4% versus 8.0% for the SPY.
Since Jan 2004 it has returned 309.9% versus 19.5% for the SPY.
Since Jan 2003 it has returned 485.6% versus 53.2% for the SPY.
Numbers are from ETFreplay.com using the 50/50 settings with monthly rebalancing as needed.
Until someone runs at backtest with additional constraints that generates a higher yield over the same timeframe, I'll stick to this simple system.
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hmsb4494
81 posts
msg #92133
- Ignore hmsb4494 |
5/5/2010 2:46:49 PM
If I had returns like this over the last 7 years I would have mobs of people after me to manage their money !!!
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