Momentum Investing

[moda0306]

LW,

Can we comprimise at $1 Trillion?

[Lone Wolf]

Can we comprimise at $1 Trillion?

For sound money nancyboys such as myself, the mere mention of any denomination larger than a Sacagawea dollar necessitates the use of smelling salts.

[moda0306]

Can we comprimise at $1 Trillion?

For sound money nancyboys such as myself, the mere mention of any denomination larger than a Sacagawea dollar necessitates the use of smelling salts.

Gold... and I mean the quality of the banter, not the barbarous relic currency.

[Odysseusa]

Current relative strength of cash, bond, gold, stock as of May 21, 2012


TLT = 96.84

VTI = 74.16

SHY 59.48

GLD = 33.36



Source: www.ETFscreen.com

[MediumTex]

Funny, new name!

MT used it in a post I just read.  Made me laugh for about two minutes.  I'll eventually change it back, though. 

I was actually just confirming Lone Wolf's monetary orientation.

I do not know where he got it, but credit for "sound money nancyboy" goes to Lone Wolf.

[Odysseusa]

Please make sure you set a stop-loss at 7% to 8% to give you more chances of winning.
Please see an example below. We have four chances to make it right without losing.


position 1: $100,000 * 93% = $93,000 (lose 7%)
position 2: $100,000 * 93% = $86,490 (lose 7%)
position 3: $86,490 * 93% = $80,435 (lose 7%)
position 4: $80,435 * 125% = $100,544 (gain 25%)

[MachineGhost]

Current relative strength of cash, bond, gold, stock as of May 21, 2012

Ready for something more advanced?  ;D

Momentum Success Factors

If done within the PP framework, I would consider it PP v2.

[MachineGhost]

Please make sure you set a stop-loss at 7% to 8% to give you more chances of winning.
Please see an example below. We have four chances to make it right without losing.


position 1: $100,000 * 93% = $93,000 (lose 7%)
position 2: $100,000 * 93% = $86,490 (lose 7%)
position 3: $86,490 * 93% = $80,435 (lose 7%)
position 4: $80,435 * 125% = $100,544 (gain 25%)

When you use stop losses, you lower the overall win probability so it does not give you "more chances of winning".  What is the optimal stop loss has to be derived from backtesting.  Too small is bad just as too big is bad.  It should reflect the individual volatility of each investment as well.

[Odysseusa]

thanks, ladies & gentles


TLT is down ~ 1% and the TMF is down ~ 3%


I put a stop-loss around 7% to 8% at $70.00.
I bought 100 TMF ~ $75.00 per share for a total of ~$7,500



current relative strength

TLT = 95 = bond

VNQ = 92 = REIT

VTI = 76 = stock

SHY = 53 = cash

GLD = 26 = gold

VWO = 24 = emerging market


Please note that I only use a small portion of my portfolio to do this.
The majority of my portfolio is in Permanent Portfolio (cash + bond + gold + stock).

[Odysseusa]

Goal: Turn $10K into $1MIL using momentum investing with 4 main assets: cash, bond, gold, stock



It's better to have tried than not trying at all.


Current holding: TMF

[AdamA]

Goal: Turn $10K into $1MIL using momentum investing with 4 main assets: cash, bond, gold, stock

You'd need an annual return of around 16.5% for 30 years to achieve that. 

Let us know how you do. 

[Odysseusa]

Goal: Turn $10K into $1MIL using momentum investing with 4 main assets: cash, bond, gold, stock

You'd need an annual return of around 16.5% for 30 years to achieve that.  

Let us know how you do.  

AA

Wish me luck, ok.



$10,000
50% annual return


1 : 16320.94
2 : 26637.31
3 : 43474.6
4 : 70954.64
5 : 115804.65
6 : 189004.09
7 : 308472.47
8 : 503456.12
9 : 821687.78
10 : 1341071.81

[Odysseusa]

Current Relative Strength of cash, bond, gold, stock


TLT = 95

VTI = 76

SHY = 55

GLD = 35



www.ETFscreen.com

[sophie]

Good luck Odysseusa!!!

Just to increase uncertainty a bit more...am wondering what the best time frame to use as the basis.  I went on Google finance and took a look at the overall performance for different time periods of TLT, GLD, VTSMX, and SHY.  Here are the numbers:

              TLT        GLD          VTSMX      SHY
1 year:    29.46%    3.52%      -1.99%      0.23%
6 months: 2.16%    -6.55%    14.08%    -0.11%
3 months: 5.01%    -11.35%    -3.96%      0.06%

So TLT wins both for long term (1 year) and short term (3 months), but obviously if you went with 6 months you'd be buying VTSMX instead.

This wild ride made me wonder if momentum strategies work best when the markets are relatively stable, like it was in the 1980's and 1990's.  So I tried a simulation test of the standard PP vs the 1 year momentum strategy with monthly checking, beginning Jan 1 2008.  It came up with an overall loss of about 3%.

So, a note of caution.

[Odysseusa]

thanks, Sophie/PPers/VPers


I am holding 100 TMF = Direxion Daily 20+ Year Treasury Bull 3X Shares

[Maestro G]

Odysseusa,

The Decision Moose intermediate timing, momentum strategy has been in TLT (actually BTTRX) for not quite a month and has been up about 3%. Since May of 2000, if you had followed DM's ETF switches to the letter, you would be up almost 1000% (a ten bagger! ) to date! http://www.decisionmoose.com/Home_Page.html Results from 1996 using funds only (until 2000), are even more impressive!

Past performance is no guarantee of future results etc, etc,...., and I certainly wouldn't use this strategy for all or the majority of my assets which would, of course, be incredibly risky! However, it does seem like William Dirlam, ex. Treasury Undersecretary is on to something here.

Good luck and have a reflective Memorial Day!

Maestro G

[Odysseusa]

Thanks, Matrestro/PPers/VPers, for your criticisms and encouragement.


Hopefully, by following this method, I can turn $10K into $100K in 10 years and $100K into $1MIL in another 10 years.


$10,000
$10,000 * 1.26 ^ 5 = 31,757
$10,000 * 1.26 ^ 10 = 100,856
$10,000 * 1.26 ^ 15 = 320,300
$10,000 * 1.26 ^ 20 = 1,017,210

[Odysseusa]

New PPer,

Can you please include the years of 1970, 1971, 1972, 2009, 2010, and 2011? Thank you.

An interesting article on momentum investing:

http://www.theglobeandmail.com/globe-in ... le2365067/

The six basic asset classes: three-month Canadian treasury bills, long-term Canadian bonds, the S&P/TSX composite, the S&P 500, international stocks (via the EAFE index), and gold, essentially mimic the PP (Canadian, US, and Int'l make up the stock portion).

Looking at the historical returns of the PP (https://web.archive.org/web/20160324133 ... l-returns/) I decided to test the theory (results below). Investing a theoretical $10,000 in gold in 1973 (since based on the 1972 gold would be the place to put your money).

Year  Allocation     Amount        Gain

1973 (100% gold): $17,560   75.6%
1974 (100% gold): $29,939   70.5%
1975 (100% gold): $23,143   -22.7%
1976 (100% TSM): $29,322   26.7%
1977 (100% TSM): $28,091   -4.2%
1978 (100% gold): $38,400   36.7%
1979 (100% gold): $90,740   136.3%
1980 (100% gold): $100,540  10.8%
1981 (100% TSM): $96,820   -3.7%
1982 (100% STB): $115,700  19.5%
1983 (100% LTB):  $116,510   0.7%
1984 (100% TSM): $121,753   4.5%
1985 (100% LTB): $159,497   31.0%
1986 (100% TSM): $185,176  16.1%
1987 (100% LTB): $179,806   -2.9%
1988 (100% gold): $151,576   -15.7%
1989 (100% TSM): $195,382   28.9%
1990 (100% TSM): $183,659   -6.0%
1991 (100% STB): $203,311    10.7%
1992 (100% TSM): $223,235    9.8%
1993 (100% TSM): $246,898    10.6%
1994 (100% gold): $241,466    -2.2%
1995 (100% TSM): $327,910   35.8%
1996 (100% TSM): $396,772   21.0%
1997 (100% TSM): $519,771   31.0%
1998 (100% TSM): $640,878   23.3%
1999 (100% TSM): $793,407   23.8%
2000 (100% TSM): $709,306   -10.6%
2001 (100% LTB):  $739,806   4.3%
2002 (100% STB): $798,990    8.0%
2003 (100% gold): $955,592    19.6%
2004 (100% TSM): $1,075,041  12.5%
2005 (100% TSM): $1,139,544   6.0%
2006 (100% gold): $1,401,639   23.0%
2007 (100% gold): $1,834,746   30.9%
2008 (100% gold): $1,924,639   4.9%

The results look pretty good to me. 8 years of negative return. 28 years of positive return. Definitely more volatility than the PP, but whereas the PP 10K grows to $317,220 from 1973-2008, this Momentum Strategy grows from 10k to $1,924,639, a whopping $1.6M more. I'm not quite savvy enough to figure out what the CAGR works out to be.  

This seems like a very attractive VP option to me.

Thoughts?

[clacy]

I think most people would have a problem adhering to an all or nothing (100% in top RS asset class) strategy.  If you've gravitated towards the PP, it's likely because you're attracted to it's relatively hedged position.

I think something as Clive suggested is the right approach.  Or maybe you run 80% of your funds in a traditional PP, and your VP (20% of your assets) into an RS strategy. 

This isn't too different from what I do.  But I include different asset classes such as commodities, REIT's, intermediate bonds and foreign stocks.

[Odysseusa]

thanks, Clacy.



TLT crosses $125 ... and TMF is almost at $80.


iShares Barclays 20+ Year Treas Bond (TLT)
Direxion Daily 20+ Yr Trsy Bull 3X Shrs (TMF)

[Odysseusa]

source: www.ETFscreen.com


Current Relative Strength of some Largest ETFs


SPDR S&P 500 SPY 72.63

iShares MSCI Emerging Index Fund EEM 20.95

SPDR Gold Shares GLD 34.64

iShares Barclays 20 Year Treasury Bond Fund TLT 96.09

IShares FTSE-Xinhua China 25 Fund FXI 13.97

[Odysseusa]

FYI


I bought 100 TMF for ~ $7500

then I put a stop-loss at $70.

Since TMF has passed $80 mark.

I modified the stop-loss from $70 to $75.

[Odysseusa]

Thanks, Clive.

TMF is getting to $85.

Make sure you use a Stop loss

[clacy]

Very good timing on your TMF trade.... It's treated you well

[Odysseusa]

thanks, clacy, clive:


Hopefully I can turn $10K to $100K in 10 years using this method. That's my goal.




Current RS of most popular ETFs


SPY = 73

QQQ = 84

EEM = 24

GLD = 35

TLT = 96

FXI = 19

source:
www.ETFscreen.com