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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


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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%.
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