Last Month's Second Best Fund Method

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beafet

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I decided to put this in it's own thread instead of hijacking the LMBFM thread.

My theory is that if you choose to invest in the second best performing fund of the prior month, you will catch a lot of trends before they peak.
I think my math must be off somewhat, but here are the returns I've calculated so far.

2009: 42.84% as of COB December 29
2008: -8.49%
2007: 1.18%
2006: 22.46%
2005: -3.03%



End of month for December 2009:

G= +0.25%
F= -1.51%
C= +1.98%
S= + 6.66%
I = + 0.81%

Anyone using the last month's best fund method would invest for January in the S fund. Using my theory, you would invest 100% into the C fund.

My goals for this theory (should it continue the way it has been) is to a) beat the LMBFM, yet b) be just as easy to implement. If anyone has any thoughts or ways to refine it, let me know!
 
[QUOTE: Beafet : imported from LMBFMS #164] No, I was talking about Last Month's Best Fund YTD numbers...I started a new thread for the second best one. I didn't want to hijack this one anymore!
[/QUOTE]

Since everyone seems to be working on Last Month's Best Fund method,
is that to say this one - 2nd best - has lost its attraction/validity?
Or just hasn't had the back-tracking the other one has?
Thank you, Beafet, for your posting of this different type of strategy - :)
 
I can't speak for anyone else, but it would probably help if I were to be able to back track this theory more accurately. I realized I'm not sure what I'm doing. If anyone wants to help guide me through it, I am game!
 
There is a problem with both the Best month and second best month and that's the lack of back-testing data. There is a hugh difference between backtesting a year's worth of daily charts vs 12 months. IMHO A decent backtest should have at least 10 years worth of data during multiple periods of time. We can't get that much data with the TSP funds, so I'd advise caution.

JMHO
 
beafet said:
I decided to put this in it's own thread instead of hijacking the LMBFM thread.

My theory is that if you choose to invest in the second best performing fund of the prior month, you will catch a lot of trends before they peak.
I think my math must be off somewhat, but here are the returns I've calculated so far.

2009: 42.84% as of COB December 29
2008: -8.49%
2007: 1.18%
2006: 22.46%
2005: -3.03%



End of month for December 2009:

G= +0.25%
F= -1.51%
C= +1.98%
S= + 6.66%
I = + 0.81%

Anyone using the last month's best fund method would invest for January in the S fund. Using my theory, you would invest 100% into the C fund.

My goals for this theory (should it continue the way it has been) is to a) beat the LMBFM, yet b) be just as easy to implement. If anyone has any thoughts or ways to refine it, let me know!
Click to expand...

beafet, I like the idea. I decided to check it out further back...

2001: +13%
2002: -5.58%
2003: +48.8%
2004: +17.3%
2005: -3.03%
2006: +19.06%
2007: +4.39%
2008: -8.49%
2009: +43.08%


2001-2009: 194.03%

Looks good to me!

Some of my yearly totals are off from yours, but I would be glad to compare numbers.
 
I get a 14.8% average annual return...does that sound right? And how does that compare to the markets in that time? 14.8 a year sounds good to me! I wish we could take it all the way back to 1988, but I can be happy with what we got!
 
Alright, if you are following the recommendations made by the Last Month's Second Best Fund Method, for February we are putting 100% into the G fund.
 
100% into I for April. Until the end of the month it looked like it would be C again.
 
Intrepid_Timer said:
Looking at the whipsaw action it incurred those few months, I can understand why.
Click to expand...

Yea I'm not a fan of these type systems, from my own perspective it's like saying "I want to come in second place." Some of these systems may appear to do well, until they don't...
 
Intrepid_Timer said:
Looking at the whipsaw action it incurred those few months, I can understand why.
Click to expand...

JTH said:
Yea I'm not a fan of these type systems, from my own perspective it's like saying "I want to come in second place." Some of these systems may appear to do well, until they don't...
Click to expand...

Actually Beafet's 2nd Best Fund method doesn't appear to whipsaw any more than the LMBF. I worked out the monthly & yearly returns for both methods from 2004 - 2012 and have posted the results in the tables below. The LMBF method averaged 9.56 IFTs/year vs. the 2nd Best Fund average of 10.22 IFTs/year. That's about equal in my book.

What isn't equal are the returns. The 2nd Best Fund method outperformed the LMBF method in 2009 which I presume is why beafet developed this method. In 2010, on the other hand, it incurred a nasty loss while the LMBF had a rather nice gain. I have to assume this is why beafet lost interest in it.

Looking at the tables we can see how the equities often take turns being the best fund for a month. I think beafet saw this and thought if he took the 2nd best from last month it could become the best this month. Unfortunately it didn't appear to work. The LMBF method returned 102.72% over the period from 2004 - 2012. That outperformed all 5 TSP Funds over the same period. The 2nd Best Fund method only returned 83.69% over the same time span. It also has 3 negative years out of 9 compared to the LMBF single negative year. That would be quite an emotional roller-coaster in anybody's book and may be what IT was referring to with the whipsaw action. :D

Of course, as has been mentioned already, this type of method is not for everybody. I'm merely comparing 2 Set-It-And-Forget-It-Type Monthly methods to see how they compare. If that's what you want, you'd be better off served by the original.


[TD="bgcolor: #CC99FF, align: left"]LMBF[/TD]
[TD="bgcolor: #CCFFFF, colspan: 2, align: center"]2004[/TD]
[TD="bgcolor: #CCFFFF, colspan: 2, align: center"]2005[/TD]
[TD="bgcolor: #CCFFFF, colspan: 2, align: center"]2006[/TD]
[TD="bgcolor: #CCFFFF, colspan: 2, align: center"]2007[/TD]
[TD="bgcolor: #CCFFFF, colspan: 2, align: center"]2008[/TD]
[TD="bgcolor: #CCFFFF, colspan: 2, align: center"]2009[/TD]
[TD="bgcolor: #CCFFFF, colspan: 2, align: center"]2010[/TD]
[TD="bgcolor: #CCFFFF, colspan: 2, align: center"]2011[/TD]
[TD="bgcolor: #CCFFFF, colspan: 2, align: center"]2012[/TD]

[TD="bgcolor: #FFFF99, align: left"]Annual[/TD]
[TD="bgcolor: #FFFF99"][/TD]
[TD="bgcolor: #FFFF99, align: right"]13.00%[/TD]
[TD="bgcolor: #FFFF99"][/TD]
[TD="bgcolor: #FFFF99, align: right"]2.38%[/TD]
[TD="bgcolor: #FFFF99"][/TD]
[TD="bgcolor: #FFFF99, align: right"]7.07%[/TD]
[TD="bgcolor: #FFFF99"][/TD]
[TD="bgcolor: #FFFF99, align: right"]10.97%[/TD]
[TD="bgcolor: #FFFF99"][/TD]
[TD="bgcolor: #FFFF99, align: right"] (10.96%) [/TD]
[TD="bgcolor: #FFFF99"][/TD]
[TD="bgcolor: #FFFF99, align: right"]9.66%[/TD]
[TD="bgcolor: #FFFF99"][/TD]
[TD="bgcolor: #FFFF99, align: right"]12.85%[/TD]
[TD="bgcolor: #FFFF99"][/TD]
[TD="bgcolor: #FFFF99, align: right"]12.22%[/TD]
[TD="bgcolor: #FFFF99"][/TD]
[TD="bgcolor: #FFFF99, align: right"]19.27%[/TD]

[TD="align: left"]IFTs/pos[/TD]
[TD="align: right"]11[/TD]
[TD="align: center"]3rd[/TD]
[TD="align: right"]9[/TD]
[TD="align: center"]Last[/TD]
[TD="align: right"]11[/TD]
[TD="align: center"]4th[/TD]
[TD="align: right"]11[/TD]
[TD="align: center"]2nd[/TD]
[TD="align: right"]10[/TD]
[TD="align: center"]3rd[/TD]
[TD="align: right"]10[/TD]
[TD="align: center"]4th[/TD]
[TD="align: right"]7[/TD]
[TD="align: center"]3rd[/TD]
[TD="align: right"]8[/TD]
[TD="align: center"]1st[/TD]
[TD="align: right"]9[/TD]
[TD="align: center"]1st[/TD]

[TD="bgcolor: #CC99FF, align: left"]2ndBest[/TD]
[TD="bgcolor: #CCFFFF, colspan: 2, align: center"]2004[/TD]
[TD="bgcolor: #CCFFFF, colspan: 2, align: center"]2005[/TD]
[TD="bgcolor: #CCFFFF, colspan: 2, align: center"]2006[/TD]
[TD="bgcolor: #CCFFFF, colspan: 2, align: center"]2007[/TD]
[TD="bgcolor: #CCFFFF, colspan: 2, align: center"]2008[/TD]
[TD="bgcolor: #CCFFFF, colspan: 2, align: center"]2009[/TD]
[TD="bgcolor: #CCFFFF, colspan: 2, align: center"]2010[/TD]
[TD="bgcolor: #CCFFFF, colspan: 2, align: center"]2011[/TD]
[TD="bgcolor: #CCFFFF, colspan: 2, align: center"]2012[/TD]

[TD="bgcolor: #FFFF99, align: left"]Annual[/TD]
[TD="bgcolor: #FFFF99"][/TD]
[TD="bgcolor: #FFFF99, align: right"]17.10%[/TD]
[TD="bgcolor: #FFFF99"][/TD]
[TD="bgcolor: #FFFF99, align: right"] (4.03%) [/TD]
[TD="bgcolor: #FFFF99"][/TD]
[TD="bgcolor: #FFFF99, align: right"]17.79%[/TD]
[TD="bgcolor: #FFFF99"][/TD]
[TD="bgcolor: #FFFF99, align: right"]1.94%[/TD]
[TD="bgcolor: #FFFF99"][/TD]
[TD="bgcolor: #FFFF99, align: right"] (9.28%) [/TD]
[TD="bgcolor: #FFFF99"][/TD]
[TD="bgcolor: #FFFF99, align: right"]31.82%[/TD]
[TD="bgcolor: #FFFF99"][/TD]
[TD="bgcolor: #FFFF99, align: right"] (8.45%) [/TD]
[TD="bgcolor: #FFFF99"][/TD]
[TD="bgcolor: #FFFF99, align: right"]7.42%[/TD]
[TD="bgcolor: #FFFF99"][/TD]
[TD="bgcolor: #FFFF99, align: right"]15.75%[/TD]

[TD="align: left"]IFTs/pos[/TD]
[TD="align: right"]9[/TD]
[TD="align: left"]3rd[/TD]
[TD="align: right"]12[/TD]
[TD="align: left"]Last[/TD]
[TD="align: right"]11[/TD]
[TD="align: left"]2nd[/TD]
[TD="align: right"]10[/TD]
[TD="align: left"]Last[/TD]
[TD="align: right"]10[/TD]
[TD="align: left"]3rd[/TD]
[TD="align: right"]10[/TD]
[TD="align: center"]2nd[/TD]
[TD="align: right"]11[/TD]
[TD="align: center"]Last[/TD]
[TD="align: right"]9[/TD]
[TD="align: center"]2nd[/TD]
[TD="align: right"]10[/TD]
[TD="align: center"]4th[/TD]

Note: I had to cut out the monthlies because it wouldn't fit. Maybe I should try it as a graphic.
 
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