Variable portfolio based on "Timing" the 4 asset classes.

[Dieter]

Thanks for the update. I personally couldn't see going all in, but have definitely thought using moving averages as part of rebalances / adjusting allocations +/- 5ish percent...

[Thomas Hoog]

After some studying I will add "commodities" as a assetclass. That is a difficult asset class to found chaep. They uses different indexes and they uses future contract which makes it more costly.
Maybe some of you have found some simple "commodities" eft.
My shortlist:
DBC: eft, bit heavy on energy
RJI: EFN, which involves some risk
and they are both in $ while I prefer EUR €.
(Performance: - 0,5 % against the EUR PP: - 3.0 %; 25 % VT, 75 % cash)

[murphy_p_t]

what asset does the timing method prescribe currently?

[AdamA]

what asset does the timing method prescribe currently?

Stocks, I think. 

These timing methods are momentum based, right?

[Mdraf]

For what it's worth I started a portion of my VP mimicking the SMI Dynamic Allocation (SMIDX) with free trading Schwab ETFs.  We shall see.  Currently holding gold, stocks and foreign stocks.

[Pointedstick]

How's it going, Gerard?

[Thomas Hoog]

Well, It is the first of the month.
So here we go:
Started april first:
2 changes since the first idea:
to add commodities as a asset: to have more running horses to gambling on
And to change the cash part from 1-3 years bond to 3-5 years bond: just add some more yield knowing you will have 20-40 % in Cash.
Result:
Timed 5 assets class protfolio (EUR): -1,1 % (trading costs included)
The European HB portfolio: - 1,8 %
The AEX (index Netherlands): + 11,9 %

Number of trades: 12 (you change from short bonds to asses class en visa versa, so if you use a CD account: you will have 6 trades)
Allocation now: 26 % Stocks, 20 % REIT, 54 % cash

Allocations average april - now:
Stocks: 25 % (all the time)
LT Bond: 9 % (3 months)
Gold: 0 % ! (never)
REIT: 12 %
Commodities: 3 % (one time: that was a false signal: they rise after the expectation of cutting the QE, and drop after the FED decided otherwise.)
Cash: 51 %

Conclusion: a bit early
It seems a very conservatieve portfolio due to the large amount of Cash and the avoidance of deep drops.
However it won't make you rich. You have more trading costs and you miss the beginning of the up trend.
Maintenance is about 15 min each month.
It could be an alternatieve portfolio for people who hates deep drops and have some time and have a cheap broker.

[frommi]

When you want to know if something works, search someone who got rich that way. If you find none chances are high that those strategies don`t work. I have not found one technical analyst or market timer based on moving averages who got rich. Do you?

[Thomas Hoog]

It is based on the Ivy timed model
See Mebane Faber
http://www.mebanefaber.com/
You only get rich if you start a succefull business

[frommi]

It is based on the Ivy timed model
See Mebane Faber
http://www.mebanefaber.com/
You only get rich if you start a succefull business

That is smply not true, i know enough people that got rich by investing. Time and compounding high returns are the "secrets" to get rich.
There are thousands of people who got rich simply by buying coca cola or berkshire hathaway and sitting on their ass doing nothing. But for some people that is too easy .
Perhaps sitting on your ass doing nothing is the hardest part. 
Bankers at Wallstreet won`t tell you that, because they make the money when people start trading.

Btw. when you look how good Mebane Faber is at managing money you can look at the Symbol GTAA. Thats the fund he manages. It is public since the end of 2010 and would you have invested in 2010 you have gained exactly 0% since then. I would say he is good at selling books and getting money from his blog.

[Thomas Hoog]

Coca Cola gained 70 % in the last decade, 7 % average pro year
Nice, it just doesn't make you rich.
I made with a bit tweaked PP portfolio the last decade 7% pro year.
Nice, but I'm not rich.
Berkshire hathaway gained 116 %, 11,6 % average. He is good and he is rich. (and an execption).
Bank of America: -63% last decade, ye I went poor.
I noticed the results of MF, not good, however I thought it worth the experiment.

Apple: ROI of 25%, now we are talking.

[frommi]

Coca Cola gained 70 % in the last decade, 7 % average pro year
Nice, it just doesn't make you rich.
I made with a bit tweaked PP portfolio the last decade 7% pro year.
Nice, but I'm not rich.
Berkshire hathaway gained 116 %, 11,6 % average. He is good and he is rich. (and an execption).
Bank of America: -63% last decade, ye I went poor.
I noticed the results of MF, not good, however I thought it worth the experiment.

Apple: ROI of 25%, now we are talking.

You forgot dividends in the case of coca cola. With reinvestment of dividends you could have tripled your money every 10 years in KO. And that is a slow growing safe business and it was the same 10,20 or even 50 years ago. Rich is relative. Getting rich is easy when you don`t try to live like a rich person. Just save 80% of your income and in 5 years you have enough that compounding interest makes you rich.

[Pointedstick]

You forgot dividends in the case of coca cola. With reinvestment of dividends you could have tripled your money every 10 years in KO. And that is a slow growing safe business and it was the same 10,20 or even 50 years ago.

Why do you think KO will perform as well over the next 20 or 50 years? Aren't you worried about increasing consciousness about the negative health effects of sugary drinks eroding their core business? What makes you so sure that the future will be like the past?

Rich is relative. Getting rich is easy when you don`t try to live like a rich person. Just save 80% of your income and in 5 years you have enough that compounding interest makes you rich.

Sure, but that's true regardless of your source of income and doesn't really have anything to do with investing. If you're saving 80% of your income, your contributions will dwarf your investment returns.

[frommi]

Why do you think KO will perform as well over the next 20 or 50 years? Aren't you worried about increasing consciousness about the negative health effects of sugary drinks eroding their core business? What makes you so sure that the future will be like the past?

I don`t know, thats the reason i buy more than one business. And no i am not worried, because growth in the next years in KO comes from emerging markets, africa and stock buybacks. Even in 1990 you could have said that KO was a big company and doomed to fail or too expensive (ok sometimes it was, like in 1999 but that was so obvious). Coke is the biggest bottler on earth, they don`t only sell coke but all kinds of drinks. And people won`t stop drinking. 

Sure, but that's true regardless of your source of income and doesn't really have anything to do with investing. If you're saving 80% of your income, your contributions will dwarf your investment returns.

At the start investment returns don`t make a big part of your networth growth, but that changes after some years.
I have found a cool vid for you about compounding. http://www.valueinvestingworld.com/2013 ... nding.html
But its not about buying coca cola. 

[smurff]

Why do you think KO will perform as well over the next 20 or 50 years? Aren't you worried about increasing consciousness about the negative health effects of sugary drinks eroding their core business? What makes you so sure that the future will be like the past?

Their future will not be like the past, and it never was.  They started out putting cocaine in their drinks (past), but removed it on the eve of illegality (future).  There are other examples.  They have one of the best distribution networks in the world (even in a tiny Asian village you can find a Coca-Cola),  and do enough r&d and market research to know when the writing is on the wall.  The branded bottled water, tea, vitamin drinks, energy drinks, juices, hydration drinks, organic tea/juice, etc. you probably buy are mostly owned by Coca-Cola, so it's not just sugar-laden drinks or excitotoxin-laced diet sodas where they make their money.  They are growing their own variety of non gmo stevia that got rid of the aftertaste.  I believe they are testing it in Argentina.  If things go well they plan to use it as a sweetener around the world.

And if my recollection is accurate, I believe they have paid and increased their dividends annually for a very long time.  Fifty years, forty years, something like that.

Not that this guarantees anything for the future, but it's a good start.

And if you start youngish (20-40 year investment term), invest regularly in a diversified group of  boring companies like this, avoid trading or selling during crashes, and reinvest dividends, yes, you can become a millionaire via investing.  But it's boring, so few people do it.  Which is more exciting to talk about making a stock market killing in, Coca-Cola--or Tesla?

[Pointedstick]

Those are all great points, smurff. Which companies are you thinking about? PG? XOM? GE?

[smurff]

There are several lists of companies like this floating on the internet.  Just Google "dividend kings", "dividend elite," "dividend aristocrats," and you'll see them.

The companies are picked by various criteria, but usually they have to do with:
longevity,
pays dividends,
long-term pattern of dealing with market shifts that could otherwise have meant their demise (know how to dodge a bullet),
Regularly increasing dividends (with an exception made sometimes for major economic crises, like the Great Depression),
no crazy accounting shenanigans or criminal executives,
very little debt,
a "moat,"
occasional stock buy-backs,
low stock prices relative to book value,
industry leaders (they're often the first company one thinks of when needing to buy "X"), 
a strategy of innovating new products and markets while maintaining cash cow product lines (that includes things people wanted in the past and will still want or need in the future). 

That's just a few of the criteria I can remember. 

Coca-Cola, Procter and Gamble, Wells Fargo, American Express, IBM, Becton Dickinson, 3M, Nestle, McDonald's, Kellogg, Church and Dwight, Phillip Morris, Johnson and Johnson, Diebold, Emerson Electric, Colgate Palmolive, Genuine Parts, Unilever, and Lowe's have appeared on lists maintained by various financial analysts and commentators, but Coca-Cola, 3M, and P&G seem to be on everybody's list.  Some lists have buy-up-to prices, so depending on stock prices they may or may not be a buy.  You never sell them (there is an exception, however, like major frauds or refusal to dodge obvious bullets), but if the price collapses, you buy like crazy.

[Thomas Hoog]

http://dripinvesting.org/
and for coke it is 51 years
and i have started a dividend growth portfolio, just for fun and retirement income. I will tell in january

[frommi]

Combined with value investing a dividend growth strategy is really great. 
I don`t know a better way to invest and there are plenty of people who got rich by doing so. But its a slow and steady path.

[Thomas Hoog]

2013 performance = - 1,2 %
benchmarked against the EUR PP with -3,4 %, it is a alpha of 2,2 %
no much, but enough to continue the experiment.

[Thomas Hoog]

Well, a milestone 
All assetsclasses are above their 200 days average. Isn't that weird. HB always assumed there was always one assetclass down the drain. Gold in 2013. However I just follow the strategy and I'm now fully invested in:
Gold, LT Bonds, Equities, REIT, Commodities.
Performance: YTD: +2 %, alpha -2% against the EURO PP.
Since april 2013: +1%, alpha +0,4% against the EURO PP.
(All costs; 17 trades included).

As predicated you lose performancy when the rally starts, it should be protective against drops. We will see.

[Thomas Hoog]

Just an update:
Standaard PP = 7,1 % YTD 2014
VP Timed (4) (5) assets = 6,5 % YTD 2014
Since the start 1 april 2013
PP = 3,7 %
VP = 5,3 %
(including trading cost).