Kevin_in_GA
4,599 posts
msg #95873
- Ignore Kevin_in_GA |
8/28/2010 9:20:41 PM
I am. I have modified it a bit, as shown below, to make each metric based on the intrinsic performance of the stock rather than relative to SPY, using the TSI on a weekly scale.
I check each Friday - if a new asset has rotated to the top of the list, I shift my 401k allocation into it until another one rotates to the top.
I backtested this weekly TSI method against lots of RS settings on ETFReplay.com. This one beats them all.
The 4 week return column is just there to let you feel good about your call, but also to let you know if another asset class is making its move to the top.
In this case I have been in AGG since May 7th - did your 401k make 3.7% since then? Not meaning to boast, but rather to point out that this rotational approach keeps you out of a lot of chop and downturn by default, which can preserve a lot of capital.
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davesaint86
725 posts
msg #95874
- Ignore davesaint86 |
8/28/2010 10:14:40 PM
Thanks Kevin. Are you allowed to trade your 401k selections at will or do you have a tme constraint. I can trade my selections every two weeks.
Thanks,
Dave
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Kevin_in_GA
4,599 posts
msg #95875
- Ignore Kevin_in_GA |
8/28/2010 10:38:05 PM
In one account, two trades per month. In the other, unlimited (as far as I know - never really tested it more than once a month or so).
Not really an issue with this approach - the average trade seems to be held for about four weeks, and if there is a period where two assets are vying for the top spot, just go with the one with less risk if you have no trades that are allowed for that week or two.
Thanks for posting your question. I have been meaning to share this weekly TSI modification for a while now. For me, it lets me get out of poor positions with a weekly check, rather than a monthly check like the RS approach was structured.
More frequent options to move if needed + higher annual returns = better system.
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davesaint86
725 posts
msg #95881
- Ignore davesaint86 |
8/29/2010 4:28:29 PM
Kevin, I just noticed that you have the weekly 50 MA in the filter. Did you mean to have the 40 weekly MA instead since it equates to the 200 DMA?
Thanks,
Dave
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cwn6161
40 posts
msg #95920
- Ignore cwn6161
modified |
8/31/2010 8:04:20 PM
I'm still using these filters for my Roth and 401k. I believe I'm restricted to trading my 401k to no more than once a month, so I'm going to stick with the old filters. My Roth has been using the more aggressive filters with the inverse ETFs. I think these are leaps and bounds better than just sticking my cash into an index fund or something - this thread has made my subscription here far worth it.
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Kevin_in_GA
4,599 posts
msg #95989
- Ignore Kevin_in_GA |
9/3/2010 1:44:41 PM
I finally got around to optimizing The TSI settings.
Using StrataSearch, I was able to have it calculate the weekly TSI data for SPY, IWM, AGG, and EEM going back to 2004. I them imported these into Excel and calculated the equity curves for each of 16 settings - weekly TSI(X,Y,1) where X = 3,5,7,9 and Y = 3,5,7,9). Luckily, the symmetric nature of double EMAs meant that I only had to calculate 10 different combinations (the triangular matrix for you math nerds). It did it for 2004 -2010 as well as 2007-2010. It seemed that most of the gains were actually made during the more volatile past 4 years.
Starting from 1/1/2007 until 8/27/2010, you got the following data:
weekly TSI(3,3,1) = 52.6% return since 2/2/2004, 45.6% return since 1/3/2007. 95 trades made since 2007.
weekly TSI(3,5,1) = 48.6% return since 2/2/2004, 50.8% return since 1/3/2007. 90 trades made since 2007.
weekly TSI(3,7,1) = 53.9% return since 2/2/2004, 50.9% return since 1/3/2007. 79 trades made since 2007.
weekly TSI(3,9,1) = 62.7% return since 2/2/2004, 45.7% return since 1/3/2007. 60 trades made since 2007.
weekly TSI(5,5,1) = 67.0% return since 2/2/2004, 59.4% return since 1/3/2007. 70 trades made since 2007.
weekly TSI(5,7,1) = 57.0% return since 2/2/2004, 35.2% return since 1/3/2007. 52 trades made since 2007.
weekly TSI(5,9,1) = 53.8% return since 2/2/2004, 42.3% return since 1/3/2007. 47 trades made since 2007.
weekly TSI(7,7,1) = 50.9% return since 2/2/2004, 42.3% return since 1/3/2007. 47 trades made since 2007.
weekly TSI(7,9,1) = 40.8% return since 2/2/2004, 30.5% return since 1/3/2007. 44 trades made since 2007.
weekly TSI(9,9,1) = 28.3% return since 2/2/2004, 25.8% return since 1/3/2007. 40 trades made since 2007.
Clearly the Weekly TSI(5,5,1) settings are the best within this set. Looking at the data from 2007, about 10% of the trades suggested were within 2 weeks of the previous trade, so that might be an issue of you are limited to only two reallocations per month.
For comparison:
SPY Buy and Hold: -19% return since 1/3/2007.
Diversified Portfolio (equal weights in all four ETFs): -0.1% return since 1/3/2007. Obviously there is value in having a diversified portfolio, but using strategic asset allocation based on buying into strength (either using RS or the weekly TSI) yields a much higher return at lower overall volatility.
These are the settings I will be using to manage my investment accounts moving forward. I don't know how many 401k accounts can say that they did better over the same time period - I just wish I had figured this out back then!
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wkloss
231 posts
msg #95998
- Ignore wkloss |
9/3/2010 5:06:52 PM
Kevin,
For clarification, are your % returns annual returns or total returns over those time periods?
Bill
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Kevin_in_GA
4,599 posts
msg #96001
- Ignore Kevin_in_GA |
9/3/2010 7:57:13 PM
Total - man if they were annual returns I would never share this one!!!
Even as total returns, they crush most more complex systems over the same time period. However, in a strong bull market this rotational system will likely underperform (e.g., the late 90's).
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davesaint86
725 posts
msg #96012
- Ignore davesaint86 |
9/4/2010 10:43:38 AM
It look's like AGG still has the TSI lead.
Dave
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davesaint86
725 posts
msg #96020
- Ignore davesaint86 |
9/5/2010 11:34:02 AM
Kevin - This is somewhat off topic, but what is your strategy for short-term cash (non-retirement) investing? Currently I invest mine in a money market paying less than 1% or so. However I've been backtesting some buy and hold portfolio's and it seems like the equal weighted portfolio of (AGG,BSV,GLD,SHY) is a viable buy and hold portfolio in especially in times like we are in now.
YTD Gain Volatility
YTD 6.7% 4.61%
2009 7.1% 6.3%
2008 7.0% 9.6%
2007 10% 4.6%
Dave
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