Tactical Asset Allocation + HBPP an intriguing combo

[Kbg]

So the bond choice is AGG for the backtest? I'll probably find a Vanguard bond mutual fund to test

[Kbg]

USMV and EFAV for the stock component, VBMFX and VFISX for the bond component 1992-May 2019

13.07 CAGR/11.54 Max DD Sharpe .49

[D1984]

USMV and EFAV for the stock component, VBMFX and VFISX for the bond component 1992-May 2019

13.07 CAGR/11.54 Max DD Sharpe .49

If you want to take it back to 1990 you can use FFXSX (or maybe 80/20 or 85/15 FIGTX/CASHX rebalanced monthly or annually in PV and saved as a portfolio with a custom ticker symbol) as an alternative to VFISX since that only goes back to 1992.

I am working on getting data for what % of world market cap was US and what percent was other countries so as to be able to create a crude synthetic ACWI minimum volatility pre-1993 which can then be blended into the actual index starting in May 1993...that way ACWV can be compared against USMV as well.

EDIT: I just noticed that you said the Sharpe was 0.49. That seems awfully low for a portfolio with a 13.07% CAGR and an 11.54% maxDD; even a fund like Wellesley (VWINX)--which is no one's idea of a risky portfolio--had a Sharpe of 0.92 for 1992-present and it had a CAGR during this time period of just over 8% and a maxDD of 18.82%.

I'm just curious...what was the Sortino ratio of the USMV/EFAV DM portfolio?

[Kbg]

Agree on the SR...weird.

[ochotona]

Shootout between VFINX Vanguard S&P500 mutual fund vs. USA MIN VOL index

1990-Present, Absolute Momentum, 12 month lookback only

VFINX CAGR = 11.30%, MAXDD = -16.3%, SORTINO = 1.23, 21 trades
USA MIN VOL CAGR = 11.94%, MAXDD = -11.5%, SORTINO = 1.76, 25 trades (didn't expect this)

Pretty cool, but the questions for me are... do you trust the index, and do you want to tilt toward that particular factor? Like I said, my spouse already owns it. Do I want to buy more? hmmmmm......

[Kbg]

I think we all have to be cognizant of the fact that as soon as something gets turned into an investable product it becomes a mechanism for bringing efficiency to that element of the market. It will be interesting to see how it works going forward. The longer I’m around this stuff the more I become impressed with the S&P 500. Ultimately it’s a momentum fight amongst America’s most successful companies...that’s been a good combo and hard to beat.

[HappyMan]

I think we all have to be cognizant of the fact that as soon as something gets turned into an investable product it becomes a mechanism for bringing efficiency to that element of the market. It will be interesting to see how it works going forward. The longer I’m around this stuff the more I become impressed with the S&P 500. Ultimately it’s a momentum fight amongst America’s most successful companies...that’s been a good combo and hard to beat.

Do you simply buy and hold s&p? Buy at dips, minus 10% and lower?

[Kbg]

My personal 25% (leveraged) is the Nasdaq 100. Mainly I just rebalance when I think it is a good time to rebalance. I have a BUNCH of indicators that are all automated in their production. My basic process is...do I need to rebalance based on bands. If the answer is yes, then I start a bit of market timing to time the rebalance. Every once in awhile I get a screaming buy or sell signal and if there is anything to rebalance then I will rebalance. For example if my mix was at 30, 26, 24, 20 I may look at the left or right end if there is an applicable signal. If there was a signal on the two in the middle I'm doing nothing. With 3x ETFs you can get a lot of movement very quickly. If I was unleveraged I'd probably just band rebalance.

All the above is an example of my basic methodology, not the specifics.

[ochotona]

On a 3 6 12 month basis, Canada is outperforming the USA. I like Canada. I need to buy some EWC on July 1 when I trade.

EWC 10.19%
SPY 9.61%

[ochotona]

The GEM portfolio is in US Equities for July 2019 (SPY, IVV, VOO, SCHX).

Having said that, I am doubting the ability of the 12-month lookback to perform accurately past the end of September, due to the extreme volatility of Q4 2019. This is a bad feature of this particular simple way to calculate momentum. It could very well post a "BUY" signal for late 2019 / early 2020 simply due to the trough in the stock market in late 2018 / early 2019.

I find that an 18 month simple moving average has similar results to the 12-month lookback, so I'll be reporting that from now on.

I'll still be comparing S&P 500 stocks vs. ACWI ex-US (I'll use the CWI ETF, it outperforms VEU) using the 12-month lookback to find out which to invest in, I just won't use the 12-month lookback to go risk-on / risk-off.

{FYI - I'm not using the above. I'm following the Economic Pulse model, which I can't disclose, but I don't want to leave readers in the lurch}

[ochotona]

Paul Novell was on Meb Faber's podcast recently.

https://mebfaber.com/2019/07/01/the-bes ... dels-fail/

[ochotona]

The GEM portfolio is in US Equities for August 2019 (SPY, IVV, VOO, SCHX)

[HappyMan]

The GEM portfolio is in US Equities for August 2019 (SPY, IVV, VOO, SCHX)

Thanks for the information. Do you still consider USMV?

[ochotona]

I am concerned USMV is too crowded a trade. Still using SP500 cap weighted ETFs.

That said, for my wife's purely buy-and-hold portfolio, I am using ACWV, iShares MSCI Min Vol Global ETF. I think over a period of time it will be more suitable for her than VT, which she was in before.

[ochotona]

The GEM portfolio is in US Equities for September 2019 (SPY, IVV, VOO, SCHX).

[ochotona]

I'm in a 401(k) which I detest. The two best funds I have access to are Invesco S&P500 Equal Weight (VADAX), and American Funds New World Fund® Class R-3 (RNWCX). The later is a global fund, actively managed and costly, and heavily EM weighted, almost 1/2 EM. I get assailed by ridiculous fees. You know what it is. Thankfully, when I turn 59.5 I can do an in-service transfer and rip the accumulated funds out.

Being half EM sounds like a recipe for failure, but I have noticed that as on Aug 30, RNWCX beats VADAX on a 12-mo momentum basis, so I switched over to it. I'm trying to run something like a GEM in my 401(k) and hope I don't hit any frequent trading limits. I should be OK.

Interesting observation I thought others would like to hear. The US vs International, the passive vs active worms may be turning.

[pmward]

Interesting observation I thought others would like to hear. The US vs International, the passive vs active worms may be turning.

Honestly, I wouldn't be surprised at all to see active start working again when we do get the next "paradigm shift". Especially since active fees have dropped considerably in the last few years. I mean, there are some solid active funds now under 1% ER (like the highly regarded Contrafund).

[ochotona]

How much does Interactive Brokers save you in trading friction? Are their order executions that much better than Schwab, Fidelity, etc for trading ETFs? That might be a consideration for a momentum investor.

[ochotona]

IBKR charges USD 0.005 per share to trade. It sounds like Schwab charge MORE than that to their customers, but we don't know it because the charges are not line-items. I am trying to get my hands on more information. They sell their order flow to 3rd party trading desks and earn commissions form it. Every years they earn $100s of millions in this manner.

[Kbg]

I don’t have Schwab so I can’t compare, but pure commission wise if you are swinging a really big bat fixed commission is cheaper than IB.

IB provides a ton of methods to control your trade. Of note, as of Friday IB now offers a commission free trading account for US stocks and ETFs.

[ochotona]

The GEM portfolio is in US Equities for October 2019 (SPY, IVV, VOO, SCHX)

[ochotona]

The GEM portfolio is in US Equities for November 2019 (SPY, IVV, VOO, SCHX). It's early to call it, but a change is highly unlikely.

[HappyMan]

Here is a Canadian version of GEM, Hot Potato Portfolio,

https://www.moneysense.ca/save/investin ... portfolio/

[ochotona]

PODCASTS

Gary Antonacci

https://www.stitcher.com/s?eid=60239439&refid=asa


Paul Novell

https://www.stitcher.com/s?eid=65459054&refid=asa

[TrickPony]

Thanks for the info.