For example, suppose at the beginning of February 2012, the two assets with the highest value of the "Investment Value Index" would be cash and long-term Treasury bonds, I would allocate 50% of the capital to SHY and the other 50% to TLT. If at the beginning of March 2012, the two assets with the highest value of the "Investment Value Index" change to gold and long-term Treasury bonds, I would exchange SHY to GLD, and continue to hold TLT.
The equity growth curve from January 2003 to December 2011 is as follows:
A few parameters of the ETF Asset Management System are:
Investment vehicles: ETFs of five major asset classes (SHY, TLT, GLD, SPY, and IYR)
Annualized return: 13.9% (from January 2003 to December 2011)
Peak-to-trough equity drawdown: -11.9% (from November 2008 to May 2009)
Numbers of trades: 42 times in 9 years (average 4.7 trades per year)
The profit/loss profile of the completed trades is as follows:
Among the 42 trades, 28 were profitable, 14 were losses. The average profit per trade was +10.1%, the average loss per trade was -3.3%. The highest profitable trade was +87.8%, the largest loss trade was -7.2%.
In summary, the ETF Asset Management System is a 100% quantitative and mechanical investment system. It holds only 2 of the 5 ETFs of major asset classes at any time. It is simple, easy to follow, and trades fewer than 5 times per year on average. Above all, it fulfills the ultimate winning investment principle of "cut losses short, let profits run".
Disclosure: I hold 2 of the following 5 ETFs at any given time: SHY, TLT, GLD, SPY, and IYR.
=========
My investment blogs:
http://murmuronhudson.blogspot.com
http://blog.sina.com.cn/murmuronhudson
http://blog.wenxuecity.com/myindex.php?blogID=48731
I believe it great and a kind of followed this strategy, but a little aggressive.
ReplyDeleteWhy no comments so far. Maybe they think it is still a low return for them.
A robust system works under any condition, if you random the data ( shuffle the data)' it won't work. Also gold increase way more in that period, so you selection od gold is biased already ( known fact)
ReplyDeleteThe same trading rules applied to any different set of assets excluding gold also works:
ReplyDeleteETF Investment System Since 1950 (without gold)
http://etfinvestmentsystem.blogspot.com/2012/05/etf-investment-system-since-1950.html
In fact, the same principle works beyond finance to other risk business such as corporate competitions or sports betting.