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It's not just an effective strategy for managing volatility, it can significantly beat the market in cases of significant downturns, although it would tend to trail in cases where an investor gets whipsawed. From late 2000 until the beginning of 2013 the S&P went nowhere (excluding dividends, which isn't unimportant, but both the 10 month and 12 month moving average systems made enough gains that someone could get whipsawed a lot and still be ahead. The real question is whether you fear a big downturn or fear being whipsawed more in the future. Considering the volatility benefits it would seem like a decent chance of significantly improving risk adjusted returns and possibly absolute returns, although the internet bubble and the credit crisis were a big help in the last 15+ years.
Sorry if you think my comments were a sales pitch because they weren't intended to be and I have no vested interest in convincing anyone to invest in anything or any way that doesn't work for them. I think there are a lot of people here who prefer passive investments and even more who value risk-adjusted returns above absolute returns and this seemed like a decent opportunity to improve both.
I know there are people here who trade the 10 month or 200 day moving average but I'm not sure how often they make comments. I've never traded this strategy specifically but I have traded variations, such as using small cap stocks instead of large cap and trading both long and short based on moving average crossovers.
With that said it was always a relatively small portion of my portfolio because I mostly invest in active funds and individual stocks. I'm almost entirely interested in absolute returns rather than risk-adjusted but I am softening a bit over time so some of these strategies that limit the downside are becoming more attractive.
Comments
I know there are people here who trade the 10 month or 200 day moving average but I'm not sure how often they make comments. I've never traded this strategy specifically but I have traded variations, such as using small cap stocks instead of large cap and trading both long and short based on moving average crossovers.
With that said it was always a relatively small portion of my portfolio because I mostly invest in active funds and individual stocks. I'm almost entirely interested in absolute returns rather than risk-adjusted but I am softening a bit over time so some of these strategies that limit the downside are becoming more attractive.