# Buying us index funds now?



## chef1 (Dec 16, 2016)

Basically im about to start my portfolio, and i was just thinking, considering whats going on in US now woth that idiot in power, should i buy US index funds like the sp500? Seems to me that if this fars continue, the economy will go down, what's your opinions guys??thanks.


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## james4beach (Nov 15, 2012)

I don't think anyone can accurately predict this kind of thing. The stock market also does not track the economy very precisely.

Your best bet is probably to stick to whatever your desired asset allocations are


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## Rusty O'Toole (Feb 1, 2012)

I bought some S&P calls before the election and couldn't be happier. In fact I exercised them a couple of weeks ago and am now long the S&P. I have no idea how long I will hold them, I hope permanently but if they turn down too much will bail.


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## chef1 (Dec 16, 2016)

Yeah thats my think, it might not be tomorrow but in year or two?? I guess no one really knows,


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## new dog (Jun 21, 2016)

As far as who is in power or whatever, it never seems to hold much weight in the market. It may have a short term effect but it usually doesn't end up changing things to much, as for the direction of the market. However if stuff gets signed in like big increases in taxing capital gains or greatly raising the costs for business this could effect the market and the market would have to adjust to it.


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## mordko (Jan 23, 2016)

In general, the largest returns are to be expected for taking the biggest risks. If you invest only in calm political environments and countries when future seems like a sure thing, you are lowering your future returns.


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## chef1 (Dec 16, 2016)

As usually all are great perspective, much appreciated.


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## Koogie (Dec 15, 2014)

chef1 said:


> Basically im about to start my portfolio, and i was just thinking, considering whats going on in US now woth that idiot in power, should i buy US index funds like the sp500? Seems to me that if this fars continue, the economy will go down, what's your opinions guys??thanks.


We have an idiot in power here too. Did you increase or decrease your CDN index holding ?


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## chef1 (Dec 16, 2016)

Koogie said:


> We have an idiot in power here too. Did you increase or decrease your CDN index holding ?


Not really, but comparing Trudeau to Trump? I think its slight exaggeration no?


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## Koogie (Dec 15, 2014)

chef1 said:


> Not really, but comparing Trudeau to Trump? I think its slight exaggeration no?


The point is if you want to be a successful investor, you should have a plan and stick with it. Four years will be a blip on the road. Otherwise you are just market timing.

As to Trudeau. A Canadian politician can do a lot more harm to your wallet than an American one can. Even a demagogue like Trump.


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## lonewolf :) (Sep 13, 2016)

mordko said:


> In general, the largest returns are to be expected for taking the biggest risks. If you invest only in calm political environments and countries when future seems like a sure thing, you are lowering your future returns.


 The largest returns is when the risk is lower by taking the other side of the trade of either extremely bullish or bearish sentiment. There still needs to be rule of law if your not making the laws so you can collect on the winnings


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## twowheeled (Jan 15, 2011)

Koogie said:


> The point is if you want to be a successful investor, you should have a plan and stick with it. Four years will be a blip on the road. Otherwise you are just market timing.
> 
> As to Trudeau. A Canadian politician can do a lot more harm to your wallet than an American one can. Even a demagogue like Trump.


I agree that everyone needs a plan and to stick to it. However it is foolish for anyone's plan to count on the long term averaging out a 4 years of bad performance.


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## james4beach (Nov 15, 2012)

twowheeled said:


> I agree that everyone needs a plan and to stick to it. However it is foolish for anyone's plan to count on the long term averaging out a 4 years of bad performance.


The problem is that you can't possibly predict the upcoming 4 year performance. For example, if Trump enacts a whole bunch of legislation that benefits banks and his hedge fund friends, you might get a spectacular stock market performance.


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## mordko (Jan 23, 2016)

twowheeled said:


> I agree that everyone needs a plan and to stick to it. However it is foolish for anyone's plan to count on the long term averaging out a 4 years of bad performance.


Why?


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## Koogie (Dec 15, 2014)

twowheeled said:


> I agree that everyone needs a plan and to stick to it. However it is foolish for anyone's plan to count on the long term averaging out a 4 years of bad performance.


Yes, please do explain how a bad 4 years can wreck a 30 or 40 year investing plan.....


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## twowheeled (Jan 15, 2011)

Not everyone has 40+ years to invest, and even if you did, why would you keep your money in a secular bear market or a crash? Just because it will be a blip down the road decades later? If I'm a professional athlete should I play with a bad injury even though my performance will be poor, just because over the course of my career those statistics will be averaged out?


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## mordko (Jan 23, 2016)

twowheeled said:


> Not everyone has 40+ years to invest, and even if you did, why would you keep your money in a secular bear market or a crash?


A couple of reasons:

- You don't know when the crash is coming and pulling money just after a crash is the best way to lose money fast. 
- You don't know when a bear market is going to end and after it does the stocks tend to run up at a high rate. Missing that recovery period is detrimental to your prosperity.


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## indexxx (Oct 31, 2011)

mordko said:


> A couple of reasons:
> 
> - You don't know when the crash is coming and pulling money just after a crash is the best way to lose money fast.
> - You don't know when a bear market is going to end and after it does the stocks tend to run up at a high rate. Missing that recovery period is detrimental to your prosperity.


Reasons for putting in stop losses and limit orders.


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## mordko (Jan 23, 2016)

...not for someone who is calling himself "index".


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## Koogie (Dec 15, 2014)

twowheeled said:


> Not everyone has 40+ years to invest, and even if you did, why would you keep your money in a secular bear market or a crash?


 In the first instance, the OP does. We are trying to address his issues here. In the second instance, because we can't predict the markets and people who think they can are kidding themselves. Good luck with market timing. It's generally a tried and true way to lose returns. 




twowheeled said:


> If I'm a professional athlete should I play with a bad injury even though my performance will be poor, just because over the course of my career those statistics will be averaged out?


Not a very good analogy and a false equivalency anyway.


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## Rusty O'Toole (Feb 1, 2012)

chef1 said:


> As usually all are great perspective, much appreciated.


Chef1 since you took the trouble to come back, read the answers and leave comments I will pass along some information re: index investing.

A lot of very smart investors, including Warren Buffet, say that if you don't want to get too involved in the markets, the best thing to do is buy index funds. Meaning an ETF or no load fund that mimics the S&P.

Buffett even has a million dollar bet with a hedge fund manager, that the S&P fund will beat his hand picked hedge funds over 10 years.

The most important investing lesson in the world:
https://ca.finance.yahoo.com/news/buffett-most-mportant-investment-lesson-211351601.html

Why he is winning:
http://fortune.com/2016/05/11/warren-buffett-hedge-fund-bet/

Now I will add one thing. What would have happened if Buffett had followed a weekly chart of the S&P with a 50 week and 10 week moving average? What if he had bought when the 10 week was above the 50 and sold when the 10 week dipped below the 50?

Answer: He would have avoided losses and improved his already good results, and would have only made one trade every 2 or 3 years .

Suggest you look up a weekly chart of the S&P. Superimpose the moving averages, and calculate the results.


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## twowheeled (Jan 15, 2011)

Koogie said:


> In the first instance, the OP does. We are trying to address his issues here. In the second instance, because we can't predict the markets and people who think they can are kidding themselves. Good luck with market timing. It's generally a tried and true way to lose returns.


I'm curious, have you actually studied market timing and come to this conclusion? Or is this simply something you were told?


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## mordko (Jan 23, 2016)

> Now I will add one thing. What would have happened if Buffett had followed a weekly chart of the S&P with a 50 week and 10 week moving average? What if he had bought when the 10 week was above the 50 and sold when the 10 week dipped below the 50?
> 
> Answer: He would have avoided losses and improved his already good results, and would have only made one trade every 2 or 3 years


Let me get this straight... Are we giving investment advice to Warren Buffett?


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## mordko (Jan 23, 2016)

twowheeled said:


> I'm curious, have you actually studied market timing and come to this conclusion? Or is this simply something you were told?


Simply something I was told. By people who studied market timing. And presented exhaustive evidence.


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## Koogie (Dec 15, 2014)

twowheeled said:


> I'm curious, have you actually studied market timing and come to this conclusion? Or is this simply something you were told?


Lol. Okay, impress us all. Let me guess, you have a "system" or something that accurately predicts market shifts ?
You shouldn't be wasting your time here. Go out and earn billions.


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## Rusty O'Toole (Feb 1, 2012)

mordko said:


> Let me get this straight... Are we giving investment advice to Warren Buffett?


No, Chef1. Try to keep up.


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## twowheeled (Jan 15, 2011)

Koogie said:


> Lol. Okay, impress us all. Let me guess, you have a "system" or something that accurately predicts market shifts ?
> You shouldn't be wasting your time here. Go out and earn billions.


you haven't answered my question.


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## Koogie (Dec 15, 2014)

twowheeled said:


> you haven't answered my question.


Mordko already did. Do you need it repeated for you ?


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## gibor365 (Apr 1, 2011)

> Buffett had followed a weekly chart of the S&P with a 50 week and 10 week moving average? What if he had bought when the 10 week was above the 50 and sold when the 10 week dipped below the 50?


 Are you talking about weeks or days? On charts you can only enter days  , so if you convert weeks to days -> it's calendar days or trading days?!

Did you actually ran the numbers that Buffet "He would have avoided losses and improved his already good results"?

I don't use and understand charts, but out of curiosity checked SPY 5 years chart SMA (350) vs SMA 70 ... I didn't see even one instance when 70 days sliped below 350


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## mordko (Jan 23, 2016)

Isn't it amazing how well various chart based timing systems work for anything that happened in the past? And if it's so f-ing simple, how come all them active professional fund managers from the big five are so incredibly dumb that they can't outperform the index over long periods of time? I mean, they are the guys individual market timers are trying to beat, must be ultra stupid if even a baby can do it by looking at freely available pictures.

Personally, I prefer Astrology. At least you get the benefit of fresh air while looking in the sky.


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## twowheeled (Jan 15, 2011)

Koogie said:


> Mordko already did. Do you need it repeated for you ?


he speaks for you? Does he also make your investment decisions for you? 

You see, when someone presents different methods of investment such as buy and hold, and market timing to me, I do my due diligence of research on those methods before dismissing them or putting my hard earned money into them. I do not presume to be an expert, or to have any type of winning system. But the attitude that market timing or technical analysis is BS....that is a conclusion that must be drawn by the individual after educating themselves. Not from popular opinion on an internet forum. 

I have no interest in convincing you or any other buy and hold investor to change their way of thinking. And these professional fund managers you speak of do not have the same mobility or freedom to take positions as the individual investor and their retirement savings.


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## mordko (Jan 23, 2016)

Don't get me wrong, market timers and chart readers deserve nothing but gratitude and admiration. They are the unsung heros, the philanthropists who keep the wheels of the financial industry going for the benefit of both professionals and buy and hold investors.


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## Rusty O'Toole (Feb 1, 2012)

gibor365 said:


> Are you talking about weeks or days? On charts you can only enter days  , so if you convert weeks to days -> it's calendar days or trading days?!
> 
> Did you actually ran the numbers that Buffet "He would have avoided losses and improved his already good results"?
> 
> I don't use and understand charts, but out of curiosity checked SPY 5 years chart SMA (350) vs SMA 70 ... I didn't see even one instance when 70 days sliped below 350


You didn't go back far enough. This method is meant to catch major up moves and dodge major down moves like 2002 and 2008. Your MAs may be better than mine, as mine got whipsawed in late 2015 and early 2016.

I was talking about a weekly chart with a 50 week moving average and a 10 week moving average. This would be equivalent to a daily chart with a 250 and 50 day moving average (markets trade on a 5 day week).

Warren Buffet's bet runs from January 1 2008 to December 31 2017 (ten years). The SPY opened at 141.81, dipped as low as 67.1 the week of 3/9/09, a drawdown of 74.71 points or 53%. It then recovered and closed at 229.34 last Friday, for a total gain of 87.53 points or 61.72% in 9 years and 1 month. Or 6.8% per year.

If you had followed the method I outline you would have held off buying until 8/31/09 when you made your initial investment at 102.06. You would have been in the market from then until now, except for about 10 months. Your account would never have fallen below your starting point, and your biggest loss would have been 21.8 points in late 2015.

Your total gain would have been 81.39 points or 79.74%, or 12.11% per year, counting only time in the market.

When I did this estimate I used the following method of timing. Find the MA crossover point. Ignore the week in which it took place. Skip the next week, and take the closing price of the third week. I did this so there would be no question of when a cross took place. Quicker action might have resulted in better results.


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## Rusty O'Toole (Feb 1, 2012)

It's not so much timing the market as avoiding big drawdowns. I started thinking along these lines in 2009 when an investment advisor told me a lot of his clients sold their investments and closed their accounts with a loss of 30% to 40% because they couldn't stand the pain any longer. Then they missed the recovery. Idiot millionaire Derek Foster made the same mistake and he thought he was the big buy and hold investor.

I don't think I could stand to be hung by my heels and drained of 30% 40% or 50% of my retirement account either. So I started to look for ways to mitigate. My first thought was to start with a 50 - 50 mix of fixed income and mutual funds and rebalance as seemed appropriate. I tried to get the above mentioned investment advisor to handle my money on this basis and was surprised when he refused. Too bad, we both would have made some money.

The moving average cross is an old timing method, old as the hills. I first read about it in the 1970s. It was used in the past by some pretty savvy investors including Jack Dreyfus of the Dreyfus funds. It reacts to the markets, it does not attempt to predict or "time" anything. There may be better methods, if there are I wish I knew about them. It may be a primitive tool, but even a stone axe is better than nothing when you are getting mauled by the bear.


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## indexxx (Oct 31, 2011)

mordko said:


> ...not for someone who is calling himself "index".


I hold mainly index funds as the ballast in my portfolio, but also have some money allocated to individual stocks as I feel it is a reasonable and prudent strategy for my goals. Trading Apple and a few other stocks the last five years allowed me to buy my condo, which indexing alone could not have done. There can be room for both approaches in my view; I also have a few stocks I hold for the dividends and DRIPs. With certain stocks, I may use stops or limits where I see fit.


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## james4beach (Nov 15, 2012)

Rusty O'Toole said:


> It's not so much timing the market as avoiding big drawdowns . . . I don't think I could stand to be hung by my heels and drained of 30% 40% or 50% of my retirement account either. So I started to look for ways to mitigate


I hear you loud and clear, Rusty.



> My first thought was to start with a 50 - 50 mix of fixed income and mutual funds and rebalance as seemed appropriate.


I think this is the best idea for risk mitigation: adjust your asset allocation. I am pursuing the permanent portfolio, which has a history of very mild drawdowns. I am forfeiting some performance, but I really want that smoother return and shallow drawdowns.

I continue to admire the well managed balanced mutual funds out there, like RBC Monthly Income. Look at its performance:
http://quote.morningstar.ca/QuickTa...rf.aspx?t=F0CAN05M90&region=CAN&culture=en-CA

Marvel at its mere -11% drop in 2008 and 15 year annual return of 6.78%, which is nearly as good as pure TSX 60 exposure (XIU). This balanced fund had about -21% drawdown at the worst of 2008.



> The moving average cross is an old timing method, old as the hills . . . It may be a primitive tool, but even a stone axe is better than nothing when you are getting mauled by the bear.


I've played with such techniques over the years and I just haven't found on that worked. At one point I thought I had a technique that worked, then back tested it against the Nikkei and ... failed. Then I found another one that worked great on the S&P 500 and back tested it against the TSX and ... failed.

Which is why I still think asset allocation is the better answer. Adjust the dial on the stock exposure to the volatility level you will accept.


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## Rusty O'Toole (Feb 1, 2012)

Depends what you mean by "worked". If you mean, make a million $$$$$ bucks by next Tuesday, it doesn't work. If you mean it allows you to sleep nights by not losing half your account, it works.


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## james4beach (Nov 15, 2012)

Here's one reason that even the experts might question buy & hold during horrendous losses. *There is always the possibility that you selected a vehicle that is flawed in some way, or has become broken, and that won't recover*.

This is why I heavily endorse the tried-and-true Canadian index vehicle, XIU, over several others. With a 17+ year history, and 7.2% annual performance over those 17+ years, you can have some confidence during the next crash that *it will recover*. (Fun fact: Canada's XIU was the first ETF in the world).

The situation is worse when you hold a mutual fund and see it plummet during a bear market like 2000 or 2008. Will it actually recover? Who knows... many mutual funds did not recover nearly as well as the index.

These are reasons I absolutely prefer index investment, and the most tried-and-true instruments like XIU and SPY.

But with the proliferation of ETFs, many exotic instruments, heavy securities lending, etc... it would not surprise me if some of today's index ETFs do not survive the next serious crash & recovery cycle. It's not 100% certain that your ETF will recover just because the theoretical index does. In which case you might wish that you sold even after a 20% decline.


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## james4beach (Nov 15, 2012)

Rusty, OK, I actually agree with you on your last point. The methods I looked at (like tracking the 200 day moving average and looking at month ends vs moving averages) did appear to dampen the worst drawdown.

This came at the consequence of reduced returns. But they did the job of reducing maximum drawdown.


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## james4beach (Nov 15, 2012)

Rusty O'Toole said:


> If you mean it allows you to sleep nights by not losing half your account, it works.


How about a method like this, Rusty, using RSI. Here's a chart of the TSX approaching the 2008 catastrophe

http://stockcharts.com/h-sc/ui?s=$TSX&p=D&st=2008-01-01&en=2010-01-01&id=p69825107773

The small graph at the bottom is RSI, the Relative Strength Index. Watch whether it's hanging around above or below the dotted line. The market has weakened when it's persistently hanging out below the dotted line; that would be the criteria to sell. You'd buy back in when it's persistently hanging out above the dotted line.

Based on that kind of criteria, you'd sell the market in July 2008, and you'd buy back in May 2009 when it's hanging out above the dotted line again. Not bad timing.

If you look at in more detail, it will often give you false signals, like in 2010. That kind of thing is inevitable with the T/A based signals.

Here's 2011 to 2013: http://stockcharts.com/h-sc/ui?s=$TSX&p=D&st=2011-01-01&en=2013-01-01&id=p36042793141

Around June 2011 you would exit the market, also not bad timing.

Here's the most recent period:
http://stockcharts.com/h-sc/ui?s=$TSX&p=D&st=2015-01-01&en=today&id=p08989525039

You'd sell the market in June 2015, buy back in March 2016, and still be holding today. Again, a nice result.

That's one general idea, anyway. You'd want to calculate performance in fine-grained detail, take into account all incorrect decisions and the performance penalty that results, and be clear on what exactly your criteria are.


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## james4beach (Nov 15, 2012)

There's some info on RSI here: https://www.fidelity.com/learning-c...hnical-analysis/technical-indicator-guide/RSI

Warning though, many of these techniques _seem_ to show useful predictive abilities, but often that comes from trial and error with different equation parameters until someone finds a result that appears to work. At that point the person declares, "I've found an amazing way to predict the market" and publishes a newsletter.

It's one thing to work on past historical data, but an entirely different thing to work going forward. You can look around the internet and you'll find many technical analysis techniques that worked in the past. Maybe they'll keep working, maybe they won't


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## james4beach (Nov 15, 2012)

Rusty O'Toole said:


> Now I will add one thing. What would have happened if Buffett had followed a weekly chart of the S&P with a 50 week and 10 week moving average? What if he had bought when the 10 week was above the 50 and sold when the 10 week dipped below the 50?


For those curious about this method Rusty mentioned, here's that chart

2007 to 2011: http://stockcharts.com/h-sc/ui?s=$SPX&p=W&st=2007-01-01&en=2011-01-01&id=p46031659494
2011 to now: http://stockcharts.com/h-sc/ui?s=$SPX&p=W&st=2011-01-01&en=(today)&id=p13578667021

Your buy and sell indicators are when the red line crosses above or below the blue line. This has certainly provided a very good result through the financial crisis up to today.


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## james4beach (Nov 15, 2012)

And also excellent results before and after the 2000 bubble and crash.
http://stockcharts.com/h-sc/ui?s=$SPX&p=W&st=1997-01-01&en=2005-01-01&id=p31929184497

That's a nice one, Rusty.


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## Koogie (Dec 15, 2014)

mordko said:


> Don't get me wrong, market timers and chart readers deserve nothing but gratitude and admiration. They are the unsung heros, the philanthropists who keep the wheels of the financial industry going for the benefit of both professionals and buy and hold investors.


Yeah, there's always some genius sitting in his kitchen who thinks he's "researched" a new and clever way to time the market that hasn't occurred to the hordes of professional investment managers. Of course, he also has the "mobility" and "freedom" to do what billion dollar companies can't. 

Oh well, a fool and his money. As you say, it greases the wheels of the market.


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## VLT (Jan 1, 2017)

It would be hard to buy index funds now. I'd wait for dip.
I added to my holdings during the Brexit dip and still have a bit of cash waiting for another correction but I confess that I get an itchy trigger finger.


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## CalgaryPotato (Mar 7, 2015)

Are you speculating or investing long term? If you are speculating I'd try to be more specific than the whole US market and I'd try to do it on a better reason as well. If you are investing long term, you should keep allocating your money according to whatever long term plan you have, otherwise you are just chasing returns.

Not to get political but I think Trump has more risk to world stability than he does to American economic stability.


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## gibor365 (Apr 1, 2011)

> You didn't go back far enough. This method is meant to catch major up moves and dodge major down moves like 2002 and 2008. Your MAs may be better than mine, as mine got whipsawed in late 2015 and early 2016.


 It depends what time period you select  I used Yahoo finance, when I selected 5 years chart, results were very different then 1 year chart . Go figure!


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## twowheeled (Jan 15, 2011)

Back to what the OP asked...

Personal opinions about Trump aside, here is a president who has repeated promised to cut taxes for business, deregulate environmental roadblocks, and raise import taxes. Not that I don't enjoy discussing market timing but I have a feeling OP wasn't asking about RSI or moving averages.


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## Rusty O'Toole (Feb 1, 2012)

The charts James4beach linked to illustrate the method. For me, the main advantage is that it give me the confidence to buy and hold and not worry about losing half my account in a bear market. It is in no sense a get rich quick scheme. You can see by the charts that you would go for years sometimes without making a trade.

I'm also thinking of refining the method using options to trade around a core position but that is a little too esoteric to discuss here.


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## james4beach (Nov 15, 2012)

Two guys run a hedge fund down the street from my office. I visited them and looked at the technical methods they use, automated through Interactive Brokers. They are a small operation but they really have persistently outperformed the market and avoided rough periods. If their fees weren't disgustingly high, I'd invest through them... just saying, I think technical methods can work. But only with sound methodology, thorough risk control, back testing, and constantly critiquing yourself. It's a full time job IMO.

Which again is why index investing is _probably_ better.

I have a couple technical methods myself but I don't have enough confidence in them to say they're anything more than experimental. If you want to follow one of my experiments, see this thread:
http://canadianmoneyforum.com/showthread.php/105601-Lowdiv-TSX-portfolio-tracking


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## twowheeled (Jan 15, 2011)

Rusty O'Toole said:


> It's not so much timing the market as avoiding big drawdowns. I started thinking along these lines in 2009 when an investment advisor told me a lot of his clients sold their investments and closed their accounts with a loss of 30% to 40% because they couldn't stand the pain any longer. Then they missed the recovery. Idiot millionaire Derek Foster made the same mistake and he thought he was the big buy and hold investor.
> 
> I don't think I could stand to be hung by my heels and drained of 30% 40% or 50% of my retirement account either. So I started to look for ways to mitigate. My first thought was to start with a 50 - 50 mix of fixed income and mutual funds and rebalance as seemed appropriate. I tried to get the above mentioned investment advisor to handle my money on this basis and was surprised when he refused. Too bad, we both would have made some money.
> 
> The moving average cross is an old timing method, old as the hills. I first read about it in the 1970s. It was used in the past by some pretty savvy investors including Jack Dreyfus of the Dreyfus funds. It reacts to the markets, it does not attempt to predict or "time" anything. There may be better methods, if there are I wish I knew about them. It may be a primitive tool, but even a stone axe is better than nothing when you are getting mauled by the bear.


I recommend a book called "All about market timing", it examines several methods such as the cross and SMA. All methods have been backtested through various decades, it is interesting to see that a lot of these SMA methods all show an advantage over buy and hold. Of course it is using historical data to try and predict future trends. But then again, so is assuming buy and hold will return 10% over the next 5 decades.


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## gatchaman (Apr 28, 2017)

Rusty O'Toole said:


> Now I will add one thing. What would have happened if Buffett had followed a weekly chart of the S&P with a 50 week and 10 week moving average? What if he had bought when the 10 week was above the 50 and sold when the 10 week dipped below the 50?
> 
> Answer: He would have avoided losses and improved his already good results, and would have only made one trade every 2 or 3 years .
> 
> Suggest you look up a weekly chart of the S&P. Superimpose the moving averages, and calculate the results.


Thank you for the information Rusty O'Toole. Is there a site that allows me to overlay 50 week and 10 week moving averages on a chart?


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## Spudd (Oct 11, 2011)

gatchaman said:


> Thank you for the information Rusty O'Toole. Is there a site that allows me to overlay 50 week and 10 week moving averages on a chart?


Stockcharts.com


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## gatchaman (Apr 28, 2017)

*Carrot Sticks*



Spudd said:


> Stockcharts.com


Thanks Spudd, for the website recommendation.

The Stockcharts.com website uses default 200-day and 50-day moving averages.

If I am reading Rusty O'Toole's correctly, 50-week and 10-week moving averages would be 250-day and 50-day moving averages.

Has anyone optimized the moving averages to, for example 237-day and 48-day moving averages, to maximize returns?


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## mordko (Jan 23, 2016)

Totally. Best done in seconds. Try 45749857494905848 and 994584584758996


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## Spudd (Oct 11, 2011)

gatchaman said:


> Thanks Spudd, for the website recommendation.
> 
> The Stockcharts.com website uses default 200-day and 50-day moving averages.
> 
> ...


You can do weekly averages too on stockcharts.com, just set the chart to weekly, and set the simple moving averages to 50 and 10 instead of 200 and 50. All these settings are below the chart.


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## zylon (Oct 27, 2010)

gatchaman said:


> Has anyone optimized the moving averages to, for example 237-day and 48-day moving averages, to maximize returns?


Many traders try to come up with a _'one size fits all'_ combination of moving averages; I think that's a mistake.

Occasionally, I'm able to identify a moving average, trend line, Fib number, etc, that works for one security for a while*.

* synonyms: time, spell, stretch, stint, span, interval, period

Every stock, ETF, commodity, moves to it's own beat; only rarely are the patterns easily identified.

An astute poster on another forum points out that right now, *gold* priced in USD is respecting the 233 week and 600 week moving averages. However, because of the 'pennant' shape of the formation, a breakout either up or down has to happen eventually.



http://stockcharts.com/h-sc/ui?s=$GOLD&p=W&yr=5&mn=0&dy=0&id=p32425661537

ADDED:
In technical analysis the key is: it doesn't matter what I am watching;
it matters what other traders are watching.


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## Rusty O'Toole (Feb 1, 2012)

You can change the parameters any way you choose. If you use shorter time periods you will get quicker signals, getting you in and out of the market sooner which should be more profitable, but will give you more false alarms which will cost you money. Notice in the method I suggest, there were 1 or 2 times you would have got out of the market unnecessarily in I think, 2011 and 2015.

The MA's I suggest are more or less arbitrary and are the default settings on most charting sites. You could try different numbers but be aware of curve fitting.

This method does not attempt to predict anything. It reacts to what is happening or has already happened, identifying bull and bear markets after they begin. In an attempt to be in the market during bull markets, and avoiding the worst bear markets.


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## mordko (Jan 23, 2016)

^ of course this "method" is trying to predict. There is no point reacting to what has already happened - that part does not matter 1 bit for your future return.


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## Rusty O'Toole (Feb 1, 2012)

It is not trying to predict anything. The idea is to recognize a bear market and get out, then recognize a bull market and get in.If you don't like moving averages you could use Dow theory to get at the same thing. Don't make this more complicated than it is.

You could call it a trend following system if you like. They only work when the market is trending. Take a look at a chart of the S&P, you could lay a ruler under it and draw a trend line going back to 2009.That is some trend. That is the trend you want to catch, and avoid the 2007 - 2008 bear.


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## lonewolf :) (Sep 13, 2016)

mordko said:


> ^ of course this "method" is trying to predict. There is no point reacting to what has already happened - that part does not matter 1 bit for your future return.



Price is the only thing that matters future price has not happened yet. If past & current price are not studied you have nothing to work with to give an edge where future price might be

Rusty has one of the best methods here because based on price & he seams to have disapline to follow


The method tells if price is above or below moving averages & direction of moving averages.


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