A reader emailed in to tell me they noticed my 2007 paper is the most read paper on the SSRN in the past year out of over 200,000…cool! Maybe I should be a professor, ha.
The good (great) news is that an investor following the system would be have a portfolio hitting all time highs right now. Real time performance since publication (through August) is outperformance of over 30% with massive reductions in volatility and drawdown.
Do you use the system? Leave a comment with your approach, and how you’re doing!
(PS Added a new fan page for AlphaClone here on Facebook, check it out!)
Implemented May 1, up 10.5%!
I read the book in April and May 2009 and had difficulty with setting the stop/loss parameters and also had difficulty figuring out what to do after I was stopped/lossed on an ETF. The problem was typical of us humans – we are more concerned about losses than lost opportunity – I was just too conservative setting the stop/losses levels and would make them smaller if I expected a reversal in the market Well the reversals would come but I'd be uninvested when the uptrend then resumed.
The solution was to have stop/losses of no less than 10% on equity/commodity/REIT ETFs and allow a slightly smaller % for bond ETFs. And not fiddle around.
I'm using a rotation system as per the book and the results the last month have been much better.
I do although it's a hybrid – i've built up many mutual funds over the years, and while I've dumped the bads ones, i do have a pretty nice portfolio of high performing mutual funds that I can't pull the trigger to sell. But I've mapped them all to asset classes and then use the date here http://taaforthemasses.blogspot.com/ to buy and sell. I have to admit that I cut over to the strategy in April so my real test is when it comes to sell. Will I have the discipline to do it? I think so.
For a statistical look at the strategy read this http://papers.ssrn.com/sol3/papers.cfm?abstract...
Have been using this strategy since December 2008. I use a slightly modified version of the QTAA model. Asset allocation except I use more than 5 ETFs. Enter/Exit parameters the same, except I use a 200SMA and check positions every 3weeks. Overall portfolio is 0.60% b/c of losses incurred from mutual fund, which I dumped in July. ****Begin Rant*Will never own a mutual fund again * End Rant****. *Begin Priase * Meb4Prez, QTAA4LIFE *End Praise
Fund Meb
Enter Date
2/2/2009 GLD 9.43%
5/18/2009 VWO 29.04%
6/8/2009 IWV 14.94%
6/8/2009 VEU 21.30%
7/20/2009 PSP 29.15%
8/10/2009 DBC -4.64%
8/10/2009 VNQ 10.70%
12/5/2008 BND 3.51%
Mutual Funds
Exit Date
7/8/2009 HSGFX -10.26%
BRKB -39.50%
7/13/2009 CGMFX -60.41%
7/13/2009 CGMRX 57.47%
Meb, I have been using your methodology for 1-1/2 years and sleep worry-free regarding my investments because of the great performance, low volatility and low drawdown. I use a 4-week cycle instead of a monthly cycle and a 40-week SMA instead of a 10-month SMA. My model includes fund distributions in its calculations. The basic 5-fund model is going gangbusters this year. Using your methodology I personally use a long-short variation that employs leveraged funds with a minimum of 50% bonds and cash. The Sharpe ratio is about the same as the basic 5-fund portfolio but picks up a few extra hundred basis points per year in return.
Mebane,
I'd be interested to hear your (and others') opinions on what would happen if the IVY strategy gets too widespread.
Some thoughts:
* Medium-term volatility will increase. Bear markets will be deeper but recoveries sharper. The reason is that all the IVY people trade on momentum.
* The market will develop a behavior where it will chase SMA-levels to shake out IVY people and buy cheaper (bull market) or to lure back IVY people and sell dearer (bear market).
Thanks.
I bought the book in June, makes complete sense to me, I wish I had seen it earlier! Implemented the 5 ETF model in September so good results to start. Biggest questions to me:
1) Majority of my money is tied up in employer run 401Ks administered through Fidelity do I can only employ IVY for 20% of my money (rollover 401K). My employer sponsored 401K investment options are limited to too few funds to employ the strategy and I'm limited to a total of four round trip transactions (across ALL funds not just one) per year.
2) Jason70s comments have been in my mind too but I have to think it will not be an issue as the institutional money is too big to be affected by individual investors.
I use a simple 2 ishares Asset Allocation Fund timing system using the 377 day S&P500 MA on weekly basis in a Roth IRA:
AOK – 80% Bonds – when S&P500 is below 377 day MA on a weekly basis
AOA – 20% Bonds – when S&P500 is above 377 day MA on a weekly basis
If in AOK and S&P500 rises below 89 day MA I switch to AOA. If it falls below 89 day MA, I switch back to AOK.
Seems to work pretty well – all thanks to your paper/book.
Chahe
I first read your paper in late 2007/early 2008. Followed the strategy andhow it would have worked for awhile after that. Implemented it on 30% ofmy portfolio on 10/1/2008 (should have done more sooner, hindsight beingwhat it is). My portfolio is split between employer 401(k) and a rolloverIRA. For the IRA, I use the 10 ETFs that have been posted on this sightand in the book, equally weighted. For the 401(k), I use passivestrategies where available and actively managed mutual funds otherwise.Buy/sell decision is based on the 200-day SMA on the last trading day ofevery month. Then I buy/sell on the open on the next trading day. For theactive 401(k) funds, I map to a similar ETF and use that as the buy/selldecision. I download the adjusted closes from Yahoo! finance and do themath myself, although I may start using the TAA for the masses website.
Now that all indicators are a buy, I am going to implement on the remainingportion of my portfolio. For the 30% in on 10/1/2008, I am up 9.0% through9/1/2009 versus -9.8% for the S&P 500. I go to cash on the sell, i.e. donot use a long/short system, nor do I use leverage.
I appreciate the blog and enjoyed the book. Not really ready to consider the rotation system or hedge fund ideas just yet.
I've been using trend following timing for the stock market for about 25 years now. I don't use the 10 month sma, but I do use others, e.g. Ned Davis' 4% model with daily and weekly MACD crossings. I now will incorporate the 10 month sma too.
The most important item I've gotten from your work is the correlation and simple timing in real, diversified asset classes such as commodities and REITs (and bonds to a lesser degree). The moving average trend following/timing coupled with the availability of mutual funds and etfs in these asset classes are a real step forward for individual investors.
As somebody commented many months ago, I don't think this system will be “over-subscribed” because of a couple of things. 1. it's not a “get rich quick” scheme, and 2. it will under-perform significantly during strong bull markets.
However, anybody who understands math (the math of investing), knows the key thing is to miss most of the bear markets.
Thanks for the work.
Oh, I am up about 15% year to date and about 5% average per year for the past 3 years.
I've been using trend following timing for the stock market for about 25 years now. I don't use the 10 month sma, but I do use others, e.g. Ned Davis' 4% model with daily and weekly MACD crossings. I now will incorporate the 10 month sma too.
The most important item I've gotten from your work is the correlation and simple timing in real, diversified asset classes such as commodities and REITs (and bonds to a lesser degree). The moving average trend following/timing coupled with the availability of mutual funds and etfs in these asset classes are a real step forward for individual investors.
As somebody commented many months ago, I don't think this system will be “over-subscribed” because of a couple of things. 1. it's not a “get rich quick” scheme, and 2. it will under-perform significantly during strong bull markets.
However, anybody who understands math (the math of investing), knows the key thing is to miss most of the bear markets.
Thanks for the work.
Oh, I am up about 15% year to date and about 5% average per year for the past 3 years.