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Or you can now use TapaTalk again!day trading vs hold steady
- Thread starter DrD
- Start date
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Pete,
Large caps: 32%
Small/mid-cap: 43% - I'm over weightedhere because I have the Fidelity Low Priced Stock fund (FLPSX). It's had greatreturns and low volatility over the past 15 years. In addition, it has alow correlation with all of the TSP funds!Even though it is an actively managed fund, it's hard to ignore Joel Tillinghast's exceptional long term performance. Otherwise, I'd probably go with 45% large cap and 30% small/mid-cap.
EAFE: 25%
IfI get some extra money, I'llinvest in theVanguard REIT fund. Ithas solid returns,low volatility for an equity fund,and a low correlation with the TSP funds.I'd also like to invest in anemerging markets fund. Too bad TSP doesn't offer those choices.imported post
Tom,
You're providing a great service. I follow the site daily. In addition, I can see that you and most of the active members really enjoy sharing information, strategizing,playing the market, and providing TSP advice to the newbees.
I was just responding to the active vs. passivediscussion andyour 2000-2003 results were theonly "hard" dataavailable for adetailed comparison.
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Another buy and hold vs.market timing article...
[url]http://www.fundadvice.com/FEhtml/BHStrategies/9712.htm[/url]
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DrD wrote:
I know I am beating this to death but for the record, on July 26th,
DrD wrote:
"I went 70% S, 20%I, 10% C in January when I did my annual rebalancing. I think that was and is still a pretty good call"
http://www.tsptalk.com/mb/view_topic.php?id=378&forum_id=10&jump_to=3527#p3527
Pretty close but he must have changed his allocation. in there somewhere. It seems to have gotten slightly better. Another interesting note, he said this about my return the other day...
On July 26th when he wrote his first post, the G fund was up 2.44% whileDrD's allocationwas down 1.86% or behind the G fund by 3.3%.
So what does this tell you about buy andhold vs. trading? At any given time a buy and hold or trading strategy can have good and bad runs. (Today we both happen to be beatingthe G fund return.)
OK, I'm done. Just a little credibilty check. DrD seems like an intelligent guybut the post and email he sent me "Nobody can time the market. Nobody. And most certainly nobody in their right mind tries to time the market with the frequency you do."were attacks on my strategy and deserved acounterpoint.
Trading happens to be amulti-billion dollar industry and while most stock daytraders do lose money, they do so because of commissions, slippage of prices, and being against some of the brightestpeople in the world. Three things TSP members don't have to deal with.
Spaf
Honorary Hall of Fame Member
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Tom
I agree with U. There are pros and cons both ways.Stats can be manupliated to prove anything. If you get a chance please see the "TSP Highlights of October 2004" on the TSP web site. WOW! but not that suprising. The numbers only lend crediance to YOUR SITE!
Rgds
Spaf
And: Ihold to my comments to DrD, but apoligize to any members otherwise offended, because, I defend!imported post
Tom, Spaf,
New contributions are 70% S, 30%I, and have been since 1 Jan. On 1 Jan, I rebalanced what I had to 70% S, 20%I, 10%C. Sorry for the confusion.
WRT to the other points, I agree that at any given point one strategy can cross the other. Just out of curiosity, wherewas TSP Talkon July 26 against the G fund?
Also agree that this is a great site, and I'm not trying to attack you. Just want to make the point that buy and hold is a defensible strategy, easily executed,and often can outperform an more aggressive trading strategy, such as the one in your market allocation this year. See Rodik's post.
I started with the government in late 2001, so I haven't had the fun of watching the TSP run up over the 90s. I did watch 2001 and 2002 drop like rocks, but I dollar cost averaged and held to my allocations, and didn't miss any of the upticks by being out of the market when they occured. The worst part about an aggressive trading strategy is the risk of being out of the market when you get a big runup such as the last two weeks.
Best wishes
DrDGGuest
Guest
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I think you just stimulated a lot of good coversation.
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DrD wrote:
On June 28th I was beating the G fund by 1.21% :^
On July 26th I was down 6.13% vs the G:'
I can't find the post, but somewhere shortly after this, I made some sort of irresponsible guarantee that I would beat the G fund before the year is up as my indicators were screaming "BUY".
Currently .40% upvs G:^
Of course my indicators have been screaming BUY since about the end of May. It's been quite a roller-coasterbut my point still stands that not beating the G fund doesn't make a system bad. Just as your buy and hold strategy did poorly against the G fund in 2000-2002, it blew it away in 2003 and hopefully 2004.imported post
The trick is to buy and hold the right asset mix for the year -- and that is hard to do.
In 2001 and 2002, I was aggressive in equities (but not as much as the last two years) and could have done much better in the bond funds. In 2003 and so far in 2004 my equity mix has been lucky. I like the S fund because it has larger growth potential, and I like the I fund because the dollar has no bottom in sight.
I think the strategy of a newcomer (where dollar cost averaging has a more significant edge because you are investing a higher fraction of the total pie initially each week and things average out) might be different from that of an 'oldtimer', where the averaging effect is much smaller. (This is different from the investment horizon idea, which focuses on when you need the money out).
Overall, I think there are two main issues. What is the best allocation strategy, and what is the window for holding that strategy. I don't have a crystal ball for the best annual strategy, but I think that you can be the macro trends.
Steve Barr, who writes Federal Diary for the Post, and I had a long email conversation in January about the best strategies for the year. I owe him an answer, too, in January, but this year I think I picked a good one.
I prefer long windows to smooth out the bumps in the ride, but if you hold a losing strategy too long, you can get burned badly. Since the market moves in fits and starts, you can miss big moves if you are not holding to your basic strategy when it occurs (such as anyone who wasn't fully invested in equities the last two weeks). On the other hand, if you can predict the drops, it makes great sense to take your winnings out when the price is high and put them back in when they are low. I just don't think it is possible (for me at least and maybe for anyone) to do that consistently. And market theory suggests that those that claim to do it well are often just lucky for a given period. If 100 people try random strategies, some of them are going to do well just by chance.
I looked back at your home page, and I agree with your over-arching comment that too many folks are 100% in the G fund. You are doing a great service to the extent you move folks to equities.
Perhaps rebalancing more frequently than annually is a good idea. I'd be interested in other opinions about how often it should be done, and especially how to do so without missing the sudden upticks.
Best wishes
DrD
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DrD wrote:
One alternative strategy to the once a year rebalancing is the no brainer six month "system". I have theinfo hiding somewhere and I'll post it as soon as I find it, but basically you get in stocks November to April and out from May to October. Of course it is a long term strategy that does not pan out every year but it has been a very decent strategy going back many years.
Spaf
Honorary Hall of Fame Member
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DrD
We got off on the wrong foot because of your Nov. 4 post. I wasen't going to reply until I noticed that you addressed it to "All,"
RE Nov. 4. 2:41. Sometimes people follow advice and miss a huge uptick. Right, it happens all the time. It happened to me when I listened to the market reps at my investment company! No more! I'm in to market timing, not day trading, and not by choise.
We generally frown on speaking on results in the past, i.e., I went 100% x last month and made whatever.
We can't day trade with TSP. The system has a one to two day transfer time. I can day tradewith my Scottrade accounts, but not with TSP system.
I rebalance as necessary, usingThe Dow Theory, withTSP allocations in accordance with theway the TSP funds werebuilt.
RE Nov. 8. 5:16. You addressed Tom and myself.
Appreciate your indication onnew contribution and rebalancing.
Agreed strategies can cross.Thats why we talk about them here.
Buy and hold is a strategy that sometimes works. It isoften overused toseek fundsfrom the uninformed investor.
I started in the market in 1985, so I havehad the wrath of watching members and others suffer significant losses only to return to the G fund (or get out of the market)with what remaining funds they had left.
RE Nov. 8. 7:19. The market changed in 2000. So far there has not been a right asset mix for many of us. In Jan 2001 through Feb 2003 the market declined. And then a Bull market set in that lasted till about Feb. 2004. The S fund was good during the Bull period. Many folks stayed away from the I fund because of it's twofold risk (market and currency). It is still the least used fund in TSP. It has some good features but everyone is not educated on the risks either. This is where TSPTalk tries to bridge the gap. For the most part TSP participants are government employees, not market guru's. Well, we have "other" day jobs.
Dollar cost averaging depends on a certain type of market and a certain time frame in the market in order to work properly. This is not understood, but misused to seek funds from the uninformed investor. Sometimes it works, sometimes it doesn't, other times it's soomeplace inbetween. The correct approach is to understand the market, buy low and sell high, this is not always emphasised, if you get my drift.
There is no best allocation strategy, because the market and events are morein a more frequent changing nature now. The window for a particular strategy can change, more now then in the past. Again I refer back to the market since 2000. None of us have a "crystal ball", but , there is a lot of market help and methods in online web references that can educate and midigate the guess work.
I agree, I would like a long running bull market. If you are uninformed you are more likely to hold a losing strategy. That's what this site is all about. The market does move in fits. A bull market started in late October, however if a particular strategy keeps you awake at nights, then it's probably not right for you. It ispossible tostop and reverse allocations in bear markets to your advantage,under certain conditions, and it is not arandom strategy, but one thathas been around for years and years.
Take a look at the TSP web site, the number of members that are simply letting their funds go harem scarem.
We have a lot of opportunities if we work together.
Thats the heart of this site, we may not always agree, thatswhen we have the freedom to ask, why?
Tom gave no warranty/guarantee to members on this site, he just gave his welcome!
Rgds. Spaf
vectorman
Active member
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Hi Tom and all,
I'm a friend of clester.I can honestly say that after he told me about this site I have made great improvements in my investment decisions with my TSP account. I've been on the sidelines reading many of your comments which for the most part I found very helpful. I'm always learning like many of you. Tom, I appreciate your market comments. The information isinteresting and it gives me something to think about leading up to 12:00est on most days. I use to be buy and hold. Since I have been moving into and out ofmy funds based on trends, rumors, news, rate hikes...etc; I have found that I don't have to becontrolled by what goes on in the world or market conditions.For example, before if the c fund went down. I usually went all the way down with it. Now if the c fund goes down. I check out the trend, moving average.... thenif needed, I take control go into the g fund, wait for the c fund to bottom out, then jump back in making me more money. Yes, I have sometimes missed out on a one day rally, but I have also made out by not being in the market while its free falling.
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Here is a piece of an article by Rev Shark of RealMoney.com. He is a master at swing trading....
The Art of Playing the Pause
11/9/04 8:53 AMET
"The notes I handle no better than many pianists. But the pauses between the notes -- ah, that is where the art resides."
-- Artur Schabel
Many market participants have no problem loading up and riding the market when it is strong, but it is the trader who adeptly handles the pauses and pullbacks that is the true artist of Wall Street. The conventional wisdom of Wall Street is that the vast majority of investors should simply buy and hold for the long term. We are advised that trying to time the market is not only futile but likely to cost us.
Certainly, market timing is not easy, but it definitely is not impossible. The market is full of surprises, but it does have a rhythm, and the astute trader can dance to it with some success. He must stay focused and be ready to move quickly and decisively as events unfold, but he knows there will be pauses and flourishes and crescendos that will offer great opportunity. While others stay paralyzed and mesmerized by the music of the market, the virtuoso trader is looking to dance with both the bulls and the bears as the band plays on...GGuest
Guest
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Wonder Woman wrote:
Speaking of stimulating, nice pic Wonder Woman!! <
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Boots,
Not so well.
Bonds had good returns during the bear market of 2000-2001. Therefore, a portfolio containing a significant portion of bonds, i.e. 40-50%, did very well. On the other hand, yourtest portfolio would have done very well in the period 1995-1999. However, not as well as 100% C Fund.
Since the returns on stocks and bonds typically move in opposite directions,many buy and hold portfolios contain from 30-50% bonds to dampen portfolio volatility. Of course, stocksusually provide better long-term returns than bonds. EricSiegel (Stocks for the Long Run) recommends almost 100% stocks for the conservative investor over long periods. Since I'd probably panic if I lost 25-30% in a single year, regardless of the long term advantage, I hold 25-30% bonds.
60% Equities: 36% C Fund, 9% S Fund, and 15% I Fund
40% Bonds: F Fund.
Bootstestallocation: 35% C Fund, 35% S Fund, and 30% I Fund
The results:
% Annual Returns Boots Test 60/40 Buy and hold
2000 -13.0 -2.2
2001 -14.0 -4.5
2002 -12.5 -7.9
2003 36.4 21.5
2004 (YTD) 9.1 6.4
Average 1.2 2.6
Std Deviation (risk) 21.9 11.8
Starting with $100,000 in 1999:
1999 100,000 100,000
2000 87,031 97,833
200174,823 92,956
200265,462 85,650
2003 89,295 104,041
2004 (YTD) 97,379 110,676
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