No. of Recommendations: 5
Any thoughts about the DM method and why it seems to have caught on with a few MI Fools?

I do not use DM per se, but the method I do use for traded accounts (IRAs) works on similar principles: a short list of broad-gauge funds traded on the basis of intermediate-term look-backs. I have found this approach to work very well.

Here is a DM portfolio comprised of two equity funds (total US and total ex-US), plus an intermediate bond fund as the "out of market" asset. Look-back is 10 months, to echo what is done with the GTAA port. I personally would use a five-month look-back, which echos Mungofitch's 99-day rule for judging when market mojo is fading.

https://bit.ly/2Bs1o7T

Here are the same two equity funds, but with cash in lieu of bonds; again, 10 month look-back.

https://bit.ly/2W276XB

As to why this sort of thing would be appealing to MI types, I think the answer is some combination of:

1. It is mechanical, low-cost, and low-maintenance (36 trades in 21 years)
2. It offers good risk-adjusted returns, including good protection against major bears.
3. It is unlikely to be over-engineered.

Those would be my reasons, anyway. My reservation, which is a modest one, is that I do not know how to test it using GTR1, whose daily results would be valuable confirmation (or disconfirmation). That would be the final step for me. If anyone does know how to do this, I expect many would be grateful if the knowledge were shared.

I should add that I think this method could be combined easily enough with the FRED recession indicators. I do not know whether the results would be better, but it might generate more long-term gains, thus making it more suitable for a taxed account. It would also avoid false moves in an extended bull market, as many have experienced these last ten years.

Baltassar
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
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.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! 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.