MachineGhost wrote:
Working systems are a dime a dozen. Believing in them and sticking to them thick and thin is where the failure lies. Discipline.
100% true and backtestable. Systems fail when emotions trump system rules.
There's no difference between a moving average and a rebalancing band; both are measures of momentum. Ultimately, all working systems come down to momentum as that is what moves prices up or down.
You can pick stocks based on metrics other than momentum and potentially achieve success. I like systems that combine both fundamentals and momentum.
iwealth wrote:
You can pick stocks based on metrics other than momentum and potentially achieve success. I like systems that combine both fundamentals and momentum.
Yes I know, but fundamentals don't move prices, people do and prices respond either way to people's actions. When such behavior is repeated and sustained, you have velocity.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
buddtholomew wrote:
Fools errand. O, given your many years of investment experience, why would you place your faith in someone else's hands? Market timing only benefits the croupier, in other words the house that collects the transaction fees. Buy, hold, rebalance to your set allocation and move on.
Why? Because I want to retire in 10 years... that makes all the difference! Sequence of returns risk. I will gladly give up 5%-10% gain in order to avoid a 2002-2002 or 2008-2009 repeat.
There is not a new normal... the peaks and troughs have not been sliced off of cycles. Trees do not grow to the sky now, anymore than they did in years past. The business cycle has not been banished.
Trading ETFs for "free" (I know, I know) at any rate is quite economical as compared with how we did it in the past. All being done in tax-deferred accounts. We shall see.
Last edited by ochotona on Wed Oct 07, 2015 5:47 am, edited 1 time in total.
all models are now slightly positive for the year . what a wild run up for equity's in just a matter of days .. the growth model is up the most at .35% . the growth and income model is up .01 and the conservative income model is up .18%
but hey positive is positive .
Last edited by mathjak107 on Thu Oct 08, 2015 7:28 pm, edited 1 time in total.
mathjak107 wrote:
all models are now slightly positive for the year . what a wild run up for equity's in just a matter of days .. the growth model is up the most at .35% . the growth and income model is up .01 and the conservative income model is up .18%
but hey positive is positive .
"Flat is the new up"... I heard that yesterday. I didn't know whether to laugh or cry.
buddtholomew wrote:
Fools errand. O, given your many years of investment experience, why would you place your faith in someone else's hands? Market timing only benefits the croupier, in other words the house that collects the transaction fees. Buy, hold, rebalance to your set allocation and move on.
Why? Because I want to retire in 10 years... that makes all the difference! Sequence of returns risk. I will gladly give up 5%-10% gain in order to avoid a 2002-2002 or 2008-2009 repeat.
There is not a new normal... the peaks and troughs have not been sliced off of cycles. Trees do not grow to the sky now, anymore than they did in years past. The business cycle has not been banished.
Trading ETFs for "free" (I know, I know) at any rate is quite economical as compared with how we did it in the past. All being done in tax-deferred accounts. We shall see.
you can always do a rising glide path in , that has become very popular .
lets say you want to have a certain allocation in retirement . suppose it is 60/40 .
well a few years before when markets are up knock your equity level down to 30- 35% or so . that will protect you from any nasty drops , then increase equity's by 2% a year over the next 15 years .
that rising glide path has back tested perfectly in every scenario both historical and monte carlo .
it avoids early risk and provides enough equity's to grow over time with little risk that an early extended down turn will snag you .
this was conceived by michael kitces and dr wade pfau working together. it is rare they see eye to eye on things but this was one of the things they both agreed on .
ochotona wrote:
"Flat is the new up"... I heard that yesterday. I didn't know whether to laugh or cry.
Man, that is what investing feels like now. Being diversified should, at least in theory, provide an overall rate of return that nudges out inflation but there's a lot of volatility involved in getting those gains... and sequence of returns risk. The Ochotona Portfolio is handling this very nicely at the moment.
mathjak, do you have a link to a Kitces article on the rising glide path?
conventional investing will do better most of the time but if you want the protection going in to retirement there is a slight price to pay like all insurance .
investing does nudge out inflation but like working on commission each year can be up or down but overall tends to nudge it out .
Last edited by mathjak107 on Fri Oct 09, 2015 7:59 am, edited 1 time in total.
ochotona wrote:
"Flat is the new up"... I heard that yesterday. I didn't know whether to laugh or cry.
Man, that is what investing feels like now. Being diversified should, at least in theory, provide an overall rate of return that nudges out inflation but there's a lot of volatility involved in getting those gains... and sequence of returns risk. The Ochotona Portfolio is handling this very nicely at the moment.
I am concerned about being whipsawed... the Ivy Portfolio is not a lazy portfolio. My lifelong ambition is to drop into a lazy portfolio and stay there, but I think that day is not here yet, alas.
ochotona wrote:
I am concerned about being whipsawed... the Ivy Portfolio is not a lazy portfolio. My lifelong ambition is to drop into a lazy portfolio and stay there, but I think that day is not here yet, alas.
After doing some research, I decided to approximate the Ivy Portfolio methodology in my VP (tax deferred). So, we're in this together.
mathjak107 wrote:
this was conceived by michael kitces and dr wade pfau working together. it is rare they see eye to eye on things but this was one of the things they both agreed on .
So this is how one effectively deals with implementation risk and shortfall risk? Start small but increase your equity by just a measly 2% each year? Is it superior to dollar cost averaging in over time?\
I published in another thread a study that showed a rising gliding path to retirement was superior, especially in a low rate environment.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
ochotona wrote:
I am concerned about being whipsawed... the Ivy Portfolio is not a lazy portfolio. My lifelong ambition is to drop into a lazy portfolio and stay there, but I think that day is not here yet, alas.
You're looking at one in stocks this month. Whipsaws are small losses vs big wins.
My PP is a risk parity tactical PP.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
mathjak107 wrote:
this was conceived by michael kitces and dr wade pfau working together. it is rare they see eye to eye on things but this was one of the things they both agreed on .
So this is how one effectively deals with implementation risk and shortfall risk? Start small but increase your equity by just a measly 2% each year? Is it superior to dollar cost averaging in over time?\
I published in another thread a study that showed a rising gliding path to retirement was superior, especially in a low rate environment.
that is exactly what you are doing . you have a 30-35% equity going in . you are dollar cost averaging the balance back in .
conventional wisdom has you typically reducing equity's through retirement . so you go for higher gains up front and less as the years go on .
the rising glide path does the reverse since going in at full allocation and hitting an extended down turn day 1 can be a retirement killer .
this way you are building up your equity position later avoiding the risk and maintaining a higher level down the road when the effects of a down turn are far less devastating .
even 100% equity's has proven not be a problem other than volatility once you go through a decent up cycle . from that point on no problem spending down even in down markets .
What is the current composition these days? The growth model has really poor long-term risk-adjusted performance as I noted in the newsletter advisory thread. You would have been better off buying the index, but would you have known that back in 1987? It was a different planet back then!
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
the growth model out performed the s&p 500 by 428,000.00 bucks . that is a huge difference over the years all from an initial 100k in 1986 when the model was first published ., the fund maintains a beta between .80 and about 1.10 , currently at 1.09 .
i would take the growth model over the s&p index any day . in fact even in the down turn it was a head of it ytd . i stayed in the growth model for over 20 years and only switched to the growth and income / income capital preservation model because i was heading in to retirement , met my goals and could go with less volatility ..
as far as composition unfortunately i can't disclose that . that is what subscribers pay for and i am prohibited from posting that info .
mathjak107 wrote:
the growth model out performed the s&p 500 by 428,000.00 bucks . that is a huge difference over the years all from an initial 100k in 1986 when the model was first published ., the fund maintains a beta between .80 and about 1.10 , currently at 1.09 .
i would take the growth model over the s&p index any day . in fact even in the down turn it was a head of it ytd . i stayed in the growth model for over 20 years and only switched to the growth and income / income capital preservation model because i was heading in to retirement , met my goals and could go with less volatility .. http://www.fidelityinsight.com/about/pe ... f2012.html
Well, if you can't actually find a better risk-adjusted fund that you know is going to outperform the index on that basis going forward, it's sort of a red herring. I'm not sure why Hulbert uses Wilshire 5000 but there may be substantial performance differences between that and the S&P 500 for the risk metrics.
I calculate 14.36% CAGR since 1989 for the Select model and 11.61% CAGR since 1989 for the Growth model. The difference between the two at the end of 2014 is $877K. Why did you decide not to add on or switch to Select? Unproven at the time?
I don't believe I saw anything better in the Hulbert rankings in term of sector rotation, so I may give Select a shot. The more I can offload my workload and decision making, the more I can focus on what really matters: finding new investments and risk management!
What's fascinating to me is they don't really offer an edge except in Select and Income & Growth for the risk you take, nor use any market timing at all, yet they survived 25 years. You're very lucky that out of the hundreds of newsletters that have come and gone over the last 25 years, you picked a survivor to follow.
I have a lot more respect for passive indexing and trend following as a result of my advisory newsletter investigation and a lot less for managers (which was already low to begin with). Hindsight is 20/20, sure, but equipped with the most up-to-date information, it would be inexcusable to repeat the same mistakes of the past now.
Last edited by MachineGhost on Sat Oct 10, 2015 2:18 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
select models are to risky for my level of comfort . , we are not just talking volatility but actual risk . it isn't like just market risk alone . you need the right sector at the right time in the right market sentiment .
the newsletter survived and did so well because it does not attempt to time in or out or the next asset class to run up , most changes are after the trend started . (buy high , sell higher ) .
it strives to maintain a diversified portfolio that just gets nudged to fit the world better as it changes .
not all the swaps work out but the main thing is they do not really hurt you . at the worst you still are within spitting distance of the index .
much of their success is based on just discipline .
if you follow their lead it keeps you on course and in the markets . if you are in the drivers seat and the responsibility of what to do rests on your shoulders odds are pretty good you will do the wrong thing at the wrong time .
so by not having to devote more than 30 seconds a week to dealing with your portfolio as there is an e-mail update every friday night the burden is off your shoulders .
i take a big interest in investing and retirement planning as well as portfolio construction and i have to say the best thing i did all those years is keep my portfolio from myself and my second guessing my last move and thinking about my next move .
Last edited by mathjak107 on Sat Oct 10, 2015 2:28 pm, edited 1 time in total.
but by the same token i don't think the wilshire 5000 ever had a losing 10 or 20 year period , the s&p 500 had both losing 10 year and 15 year periods .
I actually like that they don't use market timing because in my experience (and I've been in this game since 1992) they all ultimately screw up and get beaten by simpler methods. I'll do the market timing, thank you; just give me what you think are the best funds.
Technically, I could just scan for the the industry signals myself, but confidence and low stress matters a great deal for overcoming behaviorial biases. Doubt is the root of all evil. I also like to have a high caliber control for my own work; this is empirical science at its finest!
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
mathjak107 wrote:
but by the same token i don't think the wilshire 5000 ever had a losing 10 or 20 year period , the s&p 500 had both losing 10 year and 15 year periods .
Based on volatility back to 1989, the S&P 500 beats out the Wilshire 5000 on a risk-adjusted basis. The latter is slightly more risky than the former.
Whoops, it looks like the Wilshire 5000 CAGR wasn't accounting for dividends since I don't have data for it and had to use what was on the web. So in the end, the differences between the two indexes are very minor due to market cap weighting. Nothing to see here, folks!
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
what i like is they have tight connections at fidelity . they know about all manager changes and major portfolio changes or shifts in allocation .
they just swapped a fund out in the growth and income model for two other funds where new very successful managers are taking over and utilizing the same criteria that they did with the other funds they had handled that did quite well .
these two funds were not so hot under the old managers and were a sell prior .
mathjak107 wrote:
but by the same token i don't think the wilshire 5000 ever had a losing 10 or 20 year period , the s&p 500 had both losing 10 year and 15 year periods .
Based on volatility back to 1989, the S&P 500 beats out the Wilshire 5000 on a risk-adjusted basis. The latter is slightly more risky than the former.
Whoops, it looks like the Wilshire 5000 CAGR wasn't accounting for dividends since I don't have data for it and had to use what was on the web. So in the end, the differences between the two indexes are very minor due to market cap weighting. Nothing to see here, folks!
damn dividends get you every time ha ha ha ha .
just got back from a photo shoot so i have to work on the shots . be back later .
Buy and Hold S&P 500: 10.31% CAGR, Net Profit: $1,533,071.92
60% Bonds/40% Stocks: 10.00% CAGR, Net Profit: $1,413,755.83 <-- Outperformed 100% Equity in Great Bond Bear (If Leveraged)
60% Bond/30% Stock/10% Gold: 9.42% CAGR, Net Profit: $1,217,727.22 <-- Risk Parity Proxy, Nearly Matches 100% Equity at Half Risk
40% Stock/30% Bonds/20% Gold/10% Cash: 8.82% CAGR, Net Profit: $1,038,843.42
40% Bonds/30% Stock/20% Gold/10% Cash: 8.65% CAGR, Net Profit: $992,412.50
35% Bonds/25% Stock/20% Gold/20% Cash: 8.14% CAGR, Net Profit: $862,454.38 <-- Risk Parity PP with Harry Browne PP Risk
Harry Browne PP: 7.71% CAGR, Net Profit: $764,654.12
That cash and gold sure does kill the PP.
Last edited by MachineGhost on Sat Oct 10, 2015 4:14 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
It does hold way more cash then i would and i am retired and living off cash.
We hold 10% at the peak , that is 2 years withdrawals and an emergency fund and it goes lower and lower as it spent down until refilled and the process of spending starts over.
