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Post by racqueteer on Jun 15, 2023 12:41:14 GMT
It's only fair to point out that this would only be relevant to a 'buy and hold' strategy; not to one focused on trading. Such funds might very well lend themselves to trading at fortuitous times during a cycle, for example. My suspicion is that many good trading vehicles might very well be poor performers "over time". I don't think so. Most of these funds are black boxes. We don't know what the managers will do next. For trading purposes I want easily understood funds. An example is "SH", which is the inverse of the S&P 500; if I think the market will crater, I'll go here. Not to a mostly unpredictable quant or low vol fund. uncleharley had shown us how it's done. I don't disagree with what you're saying, but the relative worth of a fund as a buy and hold investment does not directly translate into the viability of said fund as a trading vehicle. The points you are raising are different. Chang's response is more to the point I raised (which was more of an aside than a contradiction).
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Post by Norbert on Jun 15, 2023 12:58:01 GMT
I don't think so. Most of these funds are black boxes. We don't know what the managers will do next. For trading purposes I want easily understood funds. An example is "SH", which is the inverse of the S&P 500; if I think the market will crater, I'll go here. Not to a mostly unpredictable quant or low vol fund. uncleharley had shown us how it's done. I don't disagree with what you're saying, but the relative worth of a fund as a buy and hold investment does not directly translate into the viability of said fund as a trading vehicle. The points you are raising are different. Chang's response is more to the point I raised (which was more of an aside than a contradiction). I'm saying that the funds you're referring to don't work as b&h or as trading vehicles. Obviously, a trading vehicle like SH won't work as b&h. And a long-term hold like Wellington isn't a useful trading vehicle. This is getting silly ...
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Post by richardsok on Jun 15, 2023 13:01:34 GMT
I agree, N. The "Lo Vol" ETFs like USMV, FDLO, etc have significantly under performed the wider market. But that isn't my main objection to them. My real beef is that the funds themselves show quite volatile chart patterns, regardless of the components they own under the hood.
Since you and I last went tusk-to-tusk over DVolT, I have been constantly tweaking and testing my trading assets lists, and have concluded there will never be one small set-and-forget list to use indefinitely. For instance, six months ago, I really liked MMT and PGP for short term technicals-diven traders. Now I find them less useful and have moved more toward preferred CEFs & ETFs, PHD, SPYI, to name three.
I've come around to understand the limitations of the PSAR indicator: A) it encourages too frequent trades and B) after a stock has a really sudden move, the PSAR is apt to be very unreliable for the next week or two. For fewer trade signals, I focus on (1) the same moving average crossovers as before (2) the MACD two-line crosses and (3) the PPS on thinkorswim, also as before.
Of the three indicators, the MACD is particularly forgiving when trying to trade relatively volatile assets. I find when one overlays the PPS or MAs over volatile funds, the number of Buy/Sell signals increases uncomfortably -- but the MACD seems to behave more calmly without sacrificing relative accuracy.
I understand your objections to my ideas. But I must point out my DVolT results for the last six or seven months have been excellent.
But, as you said, maybe that's just me.
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Post by anitya on Jun 15, 2023 22:14:55 GMT
Having pursued a lot of trails to the presumed holy grails, I would rather just own SPY & QQQ and their derivatives and trade around them to minimize or maximize risk-return as the primary aspect of portfolio management. Everything else seems to distract me from doing that primary job.
USMV and SPLV (or FDLO) did not lend themselves to better trading than SPY or QQQ during Covid or in 2022. So, why not minimize distractions and just use SPY and QQQ. International investing may have an advantage when USD depreciates but with so much international exposure for the current SPY/QQQ constituents, I am not sure international exposure is required.
If I were to ever disconnect even for a year, I will even sell PRWCX, my third largest holdings, and move it into SPY and / or QQQ.
All of the above thoughts are about large cap equity fund investing.
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Post by fred495 on Jun 15, 2023 23:25:46 GMT
My mention of my ownership of USMV is not to recommend USMV - just the opposite. During normal, non-event times I am fine using SPY or QQQ and do not need a lower volatility widget if that widget is going to be behaving the same as or worse than SPY or QQQ during stressed time. In that sense, I would favor a widget actively managed by someone who has shown in the past to minimize losses when the market is stressed. Yes, that would require market timing on the part of the manager. Many market timing funds did not do all that well during 2022. But i am open to checking out any recommendations. Since you so graciously offered "to checking out any recommendations", I would be interested in your opinion of BLNDX and JHQAX, widgets "actively managed by someone who has shown in the past to minimize losses when the market is stressed". As I said previously, I am a retired and a conservative investor who is more interested in preserving capital than seeking return on capital. I don't really need a lot more money - but I certainly don't want to lose a lot. Thanks, Fred
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Post by anitya on Jun 16, 2023 1:28:41 GMT
My mention of my ownership of USMV is not to recommend USMV - just the opposite. During normal, non-event times I am fine using SPY or QQQ and do not need a lower volatility widget if that widget is going to be behaving the same as or worse than SPY or QQQ during stressed time. In that sense, I would favor a widget actively managed by someone who has shown in the past to minimize losses when the market is stressed. Yes, that would require market timing on the part of the manager. Many market timing funds did not do all that well during 2022. But i am open to checking out any recommendations. Since you so graciously offered "to checking out any recommendations", I would be interested in your opinion of BLNDX and JHQAX, widgets "actively managed by someone who has shown in the past to minimize losses when the market is stressed". As I said previously, I am a retired and a conservative investor who is more interested in preserving capital than seeking return on capital. I don't really need a lot more money - but I certainly don't want to lose a lot. Thanks, Fred Hi Fred, Below is my thought process (and some of it is just talking to myself) - does not mean that is appropriate for others. I am venturing to guess that the post-GFC low-no interest rates are a thing of the past and we will have higher than those rates going forward. So, I am more inclined to pair fixed income with SPY / QQQ for portfolio low volatility than try low volatility widgets. (May be like a balanced fund that varies the equity %age based on market conditions.) I am familiar with both the funds you mentioned. Between the two, I would vote for JHQAX only because if I recall it is not a black box (just rules based) but I would vote for neither. Over the long run, JHQAX loses upside to option premiums (continuous hedging costs) and if I recall, only a drop beyond the first 15% is protected. See also my opening comments. (BLNDX started a month or two before Covid and as such I can not give much credit for performance thru March 20, 2020 (Covid crash and it was down 10%). It did navigate 2022 well but I will always have to watch the manager closely because it is a black box, unless I put in a small amount of PV and if so, why bother. As an aside, BLNDX made 0.21% for the past one year, per M* charts. We would have made more money in cash. I ask myself, how would a fund's past behavior make me feel and how would I have reacted to it at that time. If I am not going to react, then why not just go with SPY / QQQ and fixed income. There are many investments that are good but may not be suitable for a specific individual / individual circumstances.) On February 11, 2022, I noticed there was some cash sitting in one of my brokerage accounts when MM interest rates were zero (?) and so I threw that amount on JHDAX. JHQAX was closed when a bought into JHDAX (just a different month starting point). (It increased by 2% in 16 months.) The first few days after I bought, I followed what JHDAX was doing and I did not feel the need to make it a serious investment and since then I forgot about it. Thanks for reminding me to clean up. Now that I look at its chart, it dropped 10% in September 2022 and at some point it was down 15%. Some people can handle phenomenal amount of complexity. I learned I am not like that. When the markets are down big, I need an empty mind which means I should be in only my long term holdings (SPY, QQQ, etc. ) at that time (or at least be able to ignore all other cratering holdings) and ready to add to those long term holdings.
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Post by fred495 on Jun 16, 2023 3:59:33 GMT
Thank you so much, anitya, for your very helpful analysis and review of BLNDX and JHQAX. Much appreciated.
You have given me food for thought about setting up my own "balanced" fund again. Somehow, during these last few turbulent years, I have moved away from that concept and relied on fund managers instead. This might be a good time to go back to the drawing board to review and revisit how I want to run my portfolio.
Thanks, again.
Fred
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Post by anitya on Jun 16, 2023 6:36:21 GMT
fred495, Glad it was useful to you. "Somehow, during these last few turbulent years, I have moved away from that concept and relied on fund managers instead." You have plenty of company! Do not be discouraged to reimagine. Zero bound interest rates forced investors take all sorts of risks they would not otherwise take: increasing risky assets to increasing black box funds in one's portfolio in search of that presumed diversifying risk-return.
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Post by Norbert on Jun 16, 2023 7:44:24 GMT
I agree, N. The "Lo Vol" ETFs like USMV, FDLO, etc have significantly under performed the wider market. But that isn't my main objection to them. My real beef is that the funds themselves show quite volatile chart patterns, regardless of the components they own under the hood. Since you and I last went tusk-to-tusk over DVolT, I have been constantly tweaking and testing my trading assets lists, and have concluded there will never be one small set-and-forget list to use indefinitely. For instance, six months ago, I really liked MMT and PGP for short term technicals-diven traders. Now I find them less useful and have moved more toward preferred CEFs & ETFs, PHD, SPYI, to name three. I've come around to understand the limitations of the PSAR indicator: A) it encourages too frequent trades and B) after a stock has a really sudden move, the PSAR is apt to be very unreliable for the next week or two. For fewer trade signals, I focus on (1) the same moving average crossovers as before (2) the MACD two-line crosses and (3) the PPS on thinkorswim, also as before. Of the three indicators, the MACD is particularly forgiving when trying to trade relatively volatile assets. I find when one overlays the PPS or MAs over volatile funds, the number of Buy/Sell signals increases uncomfortably -- but the MACD seems to behave more calmly without sacrificing relative accuracy. I understand your objections to my ideas. But I must point out my DVolT results for the last six or seven months have been excellent. But, as you said, maybe that's just me.
Hi Richard,
To be clear, I don't object to your ideas. My take is that you're a smart, successful, and experienced investor.
My issue is the ability of a third person to adopt your ideas and achieve your level of success over time using the indicators you cite. I think that you add in a level of market knowledge and sophistication that goes beyond what can be put into a book. You may use certain indicators, but are likely watching several other factors when deciding what trade to make. You don't use the indicators blindly (unlike my market-linked spreadsheets).
N.
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Post by judger on Jun 16, 2023 19:12:13 GMT
I try to get stable but decent return in my tax deferred account. RMDs from this source plus pension and social security are my retirement budget. I mix PRWCX and (TIAA Traditional/TIAA Real Estate) in roughly 3:1 proportion there. These products are not available to everyone but they just suit my needs. Once upon a time, my retirement investment strategy was 100% TIAA Real Estate and then TIAA began to change a bunch of rules regarding it and 2008 happened. I then struggled with TIAA Pershing Brokerage until I finally gave up in exhaustion and moved almost all of our retirement funds to a major brokerage (and even got paid a bit by them to do so). This thread is a final conclusion that I have gone too far with brokerage (and probably closed end funds) and need to reign in the big, wild horse.
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Post by judger on Jun 16, 2023 19:18:38 GMT
nob: Just messaged updated revisions to you. Yahoo! appears to be changing their charting technology on some browsers (taking a perfectly good system and making it inferior!) I have had to change my chart set-up instructions. Since the book came out and I focused strongly on the method, my PV has been averaging 1.3% growth / month. Of course, another real test will come when mkt turns firmly bearish again -- or highly volatile. As you see, I've had a long time to tinker and have greatly revised what DVolT funds & stocks to trade. With all due respect, I continue to think that it's extremely challenging to devise a system that consistently beats the market. You will recall that I purchased your book; and that my computer-assisted backtests of the initial version of your system (using only your recommended ETFs) were not successful.
I entertain no doubts about your personal investing / trading skills or about your anecdotal trading record. Am just skeptical that others can succeed based on what's offered in a book. I suspect that your qualitative skills are not easily transferable to novice traders.
It's also worth noting that NONE of the various publicly available low-vol or quant funds have succeeded over time. But, this is not to say that guys like Nassim Taleb couldn't beat the market. He did. He's a math genius who was able take advantage of opportunities in the derivatives market. He was definitely not relying on technical indicators on Yahoo.
Norb, just to clarify my OP, it is not my wish to beat the market but to get a reasonable market return with low volatility if it is possible. That said and after a fair amount of research and comparisons, FDLO does compare pretty well for me against a pure S&P 500 mutual fund we use. :-)))
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Post by nobhead on Jun 16, 2023 19:38:37 GMT
Now you've motivated me to stop dawdling and finish the revision patches. (There are two of them.) I'll get them done in a couple of days and message them right out to you. nob: Just messaged updated revisions to you. Yahoo! appears to be changing their charting technology on some browsers (taking a perfectly good system and making it inferior!) I have had to change my chart set-up instructions. Since the book came out and I focused strongly on the method, my PV has been averaging 1.3% growth / month. Of course, another real test will come when mkt turns firmly bearish again -- or highly volatile. As you see, I've had a long time to tinker and have greatly revised what DVolT funds & stocks to trade. richardsok, I did not get your revisions as a message. TIA
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Post by richardsok on Jun 16, 2023 20:31:55 GMT
nob: Just messaged updated revisions to you. Yahoo! appears to be changing their charting technology on some browsers (taking a perfectly good system and making it inferior!) I have had to change my chart set-up instructions. Since the book came out and I focused strongly on the method, my PV has been averaging 1.3% growth / month. Of course, another real test will come when mkt turns firmly bearish again -- or highly volatile. As you see, I've had a long time to tinker and have greatly revised what DVolT funds & stocks to trade. richardsok , I did not get your revisions as a message. TIA
You should have the updated list now.
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Post by Norbert on Jun 17, 2023 6:09:43 GMT
With all due respect, I continue to think that it's extremely challenging to devise a system that consistently beats the market. You will recall that I purchased your book; and that my computer-assisted backtests of the initial version of your system (using only your recommended ETFs) were not successful.
I entertain no doubts about your personal investing / trading skills or about your anecdotal trading record. Am just skeptical that others can succeed based on what's offered in a book. I suspect that your qualitative skills are not easily transferable to novice traders.
It's also worth noting that NONE of the various publicly available low-vol or quant funds have succeeded over time. But, this is not to say that guys like Nassim Taleb couldn't beat the market. He did. He's a math genius who was able take advantage of opportunities in the derivatives market. He was definitely not relying on technical indicators on Yahoo.
Norb, just to clarify my OP, it is not my wish to beat the market but to get a reasonable market return with low volatility if it is possible. That said and after a fair amount of research and comparisons, FDLO does compare pretty well for me against a pure S&P 500 mutual fund we use. :-)))
Yes, FDLO does have a record of slightly lower volatility compared to the S&P 500 (with a corresponding reduction of total return). That's a better result than for SPLV or USMV.
Still, I'm seeing a 96% correlation to SPY, which is pretty high. FDLO had a max drawdown of 20%, vs. 24% for the S&P 500. I'm thinking that if I really want to dampen volatility, I'd better increase my cash or bond allocation and live with lower returns.
FMSDX has pretty good "risk adjusted return" stats too.
Of course, we're seeing everything with the benefit of hindsight. How could we have chosen the best LV fund a few years ago? These vehicles have a short history; and the future may well bring new surprises.
N.
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Post by yogibearbull on Jun 17, 2023 10:28:40 GMT
A problem with low-volatility funds is that their infrequent rebalancing puts them in what WAS hot for good performance at low volatility (roughly, the Sharpe Ratio). So, they are wrong-footed for the next cycle. They may work better if they did quarterly rebalancing. I gave up on them long time ago. The idea does sound good.
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Post by judger on Jun 17, 2023 16:43:10 GMT
A problem with low-volatility funds is that their infrequent rebalancing puts them in what WAS hot for good performance at low volatility (roughly, the Sharpe Ratio). So, they are wrong-footed for the next cycle. They may work better if they did quarterly rebalancing. I gave up on them long time ago. The idea does sound good. Yogi, I believe that FDLO rebalances 2 times a year.
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Post by anitya on Jun 17, 2023 17:27:26 GMT
yogibearbull, As I mentioned earlier in the thread, I would consider looking at actively managed low / min volatility funds with a manager track record for showing that the fund is actually performed as intended. There is no guarantee that the manager would be able to execute successfully every time. There are probably more examples of long term under-performance from that one time the manager makes a wrong market call and does not correct soon enough. I think a more successful strategy in this regard is option overwrite strategies like JEPIX / JEPI. But one has to watch out for long term under-performance and JEPIX did not do all that well during Covid crash. I experimented with it and moved on. (I need the insurance to work when it matters!) I think a better cure for volatility could be using actively managed core funds (in whatever style box you prefer), though I have not tested if there is a serious long term track record of not underperforming. The more I look at various strategies, the more I am impressed with cap weighted strategies like SPY. Are there active or passive funds that take S&P 500 and trim it to get rid of some dead weight companies in it sooner than S&P 500 index rules would allow? Very few companies make a dramatic recovery from eroding corporate culture and other long term problems and better off left behind. Are the core funds managed by various firms like Schwab trying to do just that (i.e., start with cap weighted index and get rid of dead weight)?
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Post by yogibearbull on Jun 17, 2023 17:40:23 GMT
anitya, the enhanced-index funds (with minor tinkering with index components) were more popular at one time. Now I see only enhanced- value, global or bond funds. Any small improvements may be eaten up by higher ERs.
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