Global Macro Trading Journal
- Thread starter Daal
- Start date
WTF, this is insane... If you're invested in this POS, run for the hills.
http://www.wsj.com/articles/the-big-mistake-investors-make-when-buying-and-selling-funds-1459735510
Investors hurt their returns by buying highs and selling nows. People like Buffett tend to implement a different strategy of "buying more in days when stocks are going down a lot"
Effectively, that bad strategy in reverse. I don't know how much of his returns have been boosted by that strategy but its probably at least a percentage or two
Investors hurt their returns by buying highs and selling nows. People like Buffett tend to implement a different strategy of "buying more in days when stocks are going down a lot"
Effectively, that bad strategy in reverse. I don't know how much of his returns have been boosted by that strategy but its probably at least a percentage or two
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Right now I'm trying to implement a different version of that of only buying during significant sell-offs and the VIX at more than 20. That is a bit more extreme version of the Buffett strategy but I think it fits the valuation/macro picture. You risk having a market run away without you but the payoff are higher returns with a lower max drawdown
Sometimes I violate the rule (recently on PSH due the large discount to NAV and on EWZ because of some news that I saw) but I'm trying hard to avoid buying any stock I want even though I think they are undervalued. I just think at 2050 on the SPX you are just not supposed to be buying or adding. You are supposed to be putting in some hedges or ligthening up on stuff. If I'm wrong I will underperform the chasers but if I'm right, I will have good dry powder to put to use during panics
I'm all for the average person not try to beat the market and just stick to an index. But what about "safe" strategies that tend to beat the market(or boost returns)? A monkey implementing them could probably do pretty well
For instance, what about a dollar cost averaging strategy where the investor keeps his money in bonds/cash and them deploys into indexes if they are down 1% or more in the day? The amount that is already invested wouldn't be touched, its just that the new funds can only be deployed on bad days. I'm sure this is likely to boost returns in most enviroments
For instance, what about a dollar cost averaging strategy where the investor keeps his money in bonds/cash and them deploys into indexes if they are down 1% or more in the day? The amount that is already invested wouldn't be touched, its just that the new funds can only be deployed on bad days. I'm sure this is likely to boost returns in most enviroments
I try to use this sort of thinking/strategy to try to 'juice' the returns of my risk parity portfolio. Another way its to tilt a bit of the allocation depending on the macro/risk enviroment. This tends to lead to a loss of the 'all wheather' characteristic, but if done right, it will increase returns and lower the volatility
Those safe strategies that can boost returns or beat market is something that I think about a lot. One of the reasons that I write on this journal is that one day I might want to have a good amount of written material for some kind of book/booklet to the average person on personal finance that can help people safely increase their returns and help them grow their savings (another would be the recommendation to buy a primary residence as I explained last week). The personal finance universe is so overcrowded that I never really get excited about getting involved but a lot of friends/family ask for advice with regards to this type of stuff and I wish I could just hand them a little booklet that could help. Maybe one day I will do it but its probably many many years in the future
You should backtest it and see how it performs...
Looking at the WSJ chart one can already make the case that the returns in real estate (for a personal residence) is already pretty much on par with the return in stocks. Given that people bring down the theoretical return of the stock market down due biases, in the absence of some advice that can help them overcome that, the return of inflation + saved rent is pretty much in line (if not better) than what they could get getting involved in stocks, with a lot less stress
In fact, a lot of advice to the average person, I think, should be trying to asses if they should get involved in stocks at all. Perhaps with a quick survey, if they should not, then they should implement other safe ideas that can produce decent returns without exposing them to their own flaws
In fact, a lot of advice to the average person, I think, should be trying to asses if they should get involved in stocks at all. Perhaps with a quick survey, if they should not, then they should implement other safe ideas that can produce decent returns without exposing them to their own flaws