Re: Cully's Account Talk
Originally Posted by
cully
I found this quote about "exits" by a private trader informative:
'
As a closing thought, I believe it's important that we distinguish between at least six different typesof exit rules:
• Market timing: Switching to 100% cash on an indicator of the S&P 500 or other broad index.
• Risk reduction: Ignoring indexes but switching to cash based on your portfolio's rate of change.
• Stop-loss orders: Sell orders that convert into market orders when a price limit is pierced.
• Put options: Placing money on bets that pay off when prices decline a certain amount.
• Asset rotation: Investing only in assets with the strongest relative strength at any given time.
• Buy-and-hold and then liquidate near the bottom: What most investors do.
If your only investment is an index, market timing makes perfect sense. Jeremy Siegel showed this in his 2008 book Stocks for the Long Run, 4th Ed. In a backtest from 1972 through 2006, a 200-day moving average with a 1% trigger band improved the annualized return of the Nasdaq index to 14.5% rather than 10.9%, even after Siegel subtracted hefty transaction costs instead of today's low commissions. (You buy at the end of any day when the index closes more than 1% above its 200-day SMA. You switch to cash when the index closes more than 1% below. The trigger band kept transactions down to about 2.7 per year.)'
Happy Thanksgiving!
FundXcellence
As a group I hope we notify and alert when this threshold has been reached. It seems that this is an occasional and worthwhile event to know. Thanks
Current Allocation = 95%G, 5% F, Feb 4, 2016
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