Message Font: Serif | Sans-Serif
 
No. of Recommendations: 1
Raise your hand (or hit reply) if you are comfortable with investing 60-100% of your total investible assets with the BI strategy as described in TTD (including the recent modification of adding 5 year downside stocks, re #464.)

If not, why not?

- You are buying the most recognized, highly capitalized stocks on the planet.

- You have a pre-programmed entry and exit strategy.

- The Taxpayer Relief Act of 1997 mitigated the tax liability to a manageable (though far from ideal) amount if you stick with the year-and-a-day strategy.

(By the way, if you are interested in tax history, I found an interesting summary here, although I know nothing of the source): http://home.att.net/~Resurgence/TaxTimeline.htm

- You are buying equities at the bottom end of the curve, so that they may tend to move with less of a downside than the index as a whole.

I am trying to think of a compelling reason not to utilize this strategy for the bulk of a person's investible assets, especially given the prevailing "wisdom" that the market as a whole will be trading sideways or down for the forseeable future. The BI backtest shows that in the worst of recent times, BI treads water (-5.13% in 1974) with a tremendous near-term upside if you stick with it a few years.

Comments? I'm interested to know how people are planning with or practicing BI. Being both a stock investor and a worrier, I am also interested on anyone's take on BI's "crashworthyness."
Print the post Back To Top
No. of Recommendations: 0
Comments? I'm interested to know how people are planning with or practicing BI. Being both a stock investor and a worrier, I am also interested on anyone's take on BI's "crashworthyness."

If I can figure out a way to keep me out of TLAB. :o) Seriously, I think that there has to be a safety net to catch losers like TLAB who deserve their lowly status. Problem with using VL is that you don't have the latest info on these stock. I think someone said that they wait until VL has fresh data on the stock that passes the screen, then they buy.
Print the post Back To Top
No. of Recommendations: 0
motxoc:
Funny you should ask; I started asking myself the same question a few months ago. I don't think I'm quite comfortable with 60% but 25% yes. Start doulbling your $$ every 3 years and you are up to quite a sum after 15 years.

I will be staying inside the box though; the test has just been on Dow stocks with the year holding period. That's what I'll stick with...

~yahoosier
Print the post Back To Top
No. of Recommendations: 1
50% in BI
35% momentum
10% hedged options
5% cash
10% shorts/margin

David
Print the post Back To Top
No. of Recommendations: 0
davidMN:
50% in BI
35% momentum
10% hedged options
5% cash
10% shorts/margin



You must be what some people call an "advanced" investor. I take it from your list that BI represents value, and momentum does not necessarily mean growth but stocks that would be considered High RS and High ES ? Do you use IBD to screen these stocks ?

And, lordy, what are hedged options ?

At least I understand cash and shorts :o)
Print the post Back To Top
No. of Recommendations: 0
50% in BI
35% momentum
10% hedged options
5% cash
10% shorts/margin
You must be what some people call an "advanced" investor. I take it from your list that BI represents value, and momentum does not necessarily mean growth but stocks that would be considered High RS and High ES ? Do you use IBD to screen these stocks ?
And, lordy, what are hedged options ?>>

Yep, the 50% is the value portion of the portfolio. The momentum stocks are picked using a regression formula described on the mechanical investing board (you'll find threads under RRS). Basically, it's picking the high RS stocks from "Timely" stocks on the Valueline survey and penalizing them for increasing degrees of volatility. This helps prevent Maalox moments. I also occasionally trade stocks found on my NetScreen (from Marketguide) version of the Foolish 8 screen.

The "hedged" options simply means that I am almost never just buying puts/calls, I'm usually doing calendar, bull or bear spreads. It's just a way to hedge the risk inherent in options trading. It's sort of how I try to "juice" my returns. In the past couple years, options have added about 3% to my compounded annual growth rate, shorts about 2%. My goal is to average over 30%/year...and I expect at least 25% to come from long stocks (value and momentum), so I need to increase the returns with the shorts and options. (I wish to retire early and travel the world:)

Have I accomplished the average 30% returns? Since I really started seriously trading, yes (the past 3 years). I even averaged about 30% before, but I attribute that to luck and the bull market (one example of my exact thought process was: Gee, the internet is cool, Cisco makes stuff, it's big, I'll buy it....fortunately, in the mid '90's, that was enough).

This year has been difficult...but the momentum subset is up 10%, the BI section up 15% and the options/shorts have both contributed a total of about 2%, so I'm pretty much on track for this year, although I'm worried about the "legs" of some of the BI stocks I own, like Alcoa.

David

Print the post Back To Top
No. of Recommendations: 0
I think
someone said that they wait until VL has fresh data on the stock that passes the screen, then they buy.


I think if you 'wait' for fresh data..you will miss the most of most BI plays that turn out good.
Print the post Back To Top
No. of Recommendations: 0
davidMN:Yep, the 50% is the value portion of the portfolio. The momentum stocks are picked using a regression formula described on the mechanical investing board (you'll find threads under RRS). Basically, it's picking the high RS stocks from "Timely" stocks on the Valueline survey and penalizing them for increasing degrees of volatility. This helps prevent Maalox moments. I also occasionally trade stocks found on my NetScreen (from Marketguide) version of the Foolish 8 screen.

Thanks David for the full response --- I'll take you up on looking at the MI board. I've lurked there before, but never felt comfortable enough to try it --- and with all the angst created by the more volatile screens I've shied away from it entirely.


Print the post Back To Top