Skip to main content
Message Font: Serif | Sans-Serif
No. of Recommendations: 3
I proposed the 2 way switch publicly in July 2005, so we have a nice out-of-sample test of the idea.
Since then
SPY: 8.67%
RSP: 8.05%
Average of those, which you'd expect if the switches were random: 8.36%
Result of the switching strategy: 9.23%, so an out-of-sample improvement of 0.87%/year.

I get, for Jul'2005 to (excluding) Sept'2020:
SPY 9.47%, stdev 14.95%
RSP 8.91%, stdev 17.44%
switch 10.21%, stdev 15.95%

SPY held 98 months.
RSP held 85 months.
88 switches. There are several strings where you switch every month for 5-7 months in a row.

For Jun'2003 (earliest possible date) to Sept-2020:
SPY 9.87%
RSP 9.97%
switch 10.80%

SPY held 106 months.
RSP held 101 months.
99 switches.

So, reasonable expectation is about 1% improvement.

Growth of $10,000 from 6/1/2003 to 9/1/2020:
SPY: $50,727
RSP: $51,497
Switch: $58,685

In an attempt to cut down on the whipsaws, I investigated only doing a switch if the difference in returns was greater than 1 BP (0.01% absolute difference). Reduced the switch count from 99 to 29. SPY held 83 months, RSP held 124 months. CAGR: 10.65%.
Print the post  


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.