UnThreaded | Threaded | Whole Thread (9) | Ignore Thread Prev | Next
Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76395  
Subject: Re: S&P & SMA Date: 5/3/2013 11:09 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Could you elaborate on the strategy for the sake of discussion?

The benefit of a SMA filter is not to improve returns but to improve risk-adjusted returns. That is, you get slightly lower return but greatly reduced volatility and drawdown. Faber discusses this in his paper and on his blog.

If you haven't done so already, download the spreadsheet I posted (S&P500 vs. IUL) and look at the SMA section.

vast majority of the time, the buy in was at a higher price than the sell
Yes. And in the vast minority of the time the buy in was much much lower than the sell. 18% lower for 12/2000 to 4/2002. Then IN for one month (which had a 1% loss) and then another 11% lower from 4/02 to 5/03.

It's amazing how much better a portfolio will do if you side-step a couple of 25%-45% losses.
It's amazing how much better you sleep when the market is in freefall if your portfolio is sitting in cash.

You've committed the classic neophyte mistake of thinking that the # of wins vs. losses is important. It's not. What is important is the SIZE of wins vs. losses.

That's why, BTW, most amateur covered call investors end up getting wiped out. They collect dozens and dozens of small wins, winning month after month for as much as a year or two. They think that they've found the route to free money. But then one large loss comes along and they lose as much in one trade as they made in 50 trades.

So....95 times of 100 (or whatever the number is) you'd be slightly better off holding. 3 times of 100 you'd be about even. And 2 times out of 100 your face gets ripped off.

Don't forget, too, the question of what to do with the money when the signal says to get out. In that 2000-2003 period, 1-year T-bills were yielding 6% to 1% (average 2.6%)
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (9) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Economic Implications of Cuba
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement