There seems to be some interest right now in timing moves out of and back into the market. Its not an activity I more than dabble in at the edges of my personal portfolio. But, for the mathematically inclined who have an interest in market timing, here is some not so light reading that might be of interest. As an intro, from the author of the article, here is a teaser......
"Suppose that you had the magical ability to foresee turns in the business cycle before they happened. As an investor, what would you do with that ability? Presumably, you would use it to time the stock market. You would sell equities in advance of recessions, and buy them back in advance of recoveries.....In this piece, I’m going to introduce a market timing strategy that will seek to match the performance of Perfect Recession Timing, without relying on knowledge of future recession dates." This sounds like it might be a pretty good trick. For more, see:
http://www.philosophicaleconomics.com/2016/01/gtt/
Comments
I ran out of coffee about a third of the way through. I'll pick back up at happy hour.
My thought at this point: Not even a well paid and talented fund manager can pull these strategies off, but if they are out there I would like to meet them...and own their funds.
On a separate note (but somewhat related) I have toyed with a strategy that pairs two somewhat dissimilar fund together (say an aggressive growth fund and an income fund). The strategy is to chart the two funds and to overweight whichever is out-trending the other. In a sudden downdraft, the gap loss might still exist...not sure how to hedge that event.
One of the easiest trend rules I picked up has to do with observing the lows of a security, etf or mutual fund. A positive trend is in place if the investment is making at least (3... hopefully more) consecutive "higher lows". A negative trend is in place if an investment is making at least (3) consecutive "lower lows". I try to use 1 month increments and a 1-3 year chart to avoid market noise and whipsaws.
I am watching POAGX this week as it has recently exhibited (2) consecutive monthly "lower lows". Here's POAGX charted over the last year and three years. I use red and green arrows to paint a simple picture for my limited brains cells to digest.
1 yr
3 yr