15%+15%+15%-15% = 6%

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One of the most eye-opening aspects of investing is the impact of market declines on your total return.  If you make 15% in year 1, another 15% in year 2, another 15% in year 3, and then you lose 15% in year 4, you earn….6% annual return.  That one year of 15% loss cuts your four year annualized return to just 6%. read more

V53 Model Refinement Using Fidelity Economic Cycle Analysis

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The linking of economic cycles with the technical investing algorithms is an important part of our ETF algorithm.  The model has been updated to Version 53 to include refined economic criteria.

 

In Version 53 the trade entry logic was further refined using an analysis that was conducted by Fidelity Investments and summarized in the table below.  As a result of this refinement the backtesting results (1/1/2003 – current period for our target ETF securities) for the algorithm have improved slightly: read more

George Dagnino Market Opinion January 27

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In a post in SeekingAlpha on January 27th of this year (https://seekingalpha.com/article/4401277-market-and-earning-cycles-point-to-pause-in-2022 George Dagino wrote:

 

“The last bottom of the business cycle took place in March 2020. Growth should therefore show a peak in 2022, assuming the upward leg of the cycle is two years. This should be also the time growth in earnings will begin to slow down. read more

AAII Guidance on Placing Stock Orders

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The following is guidance from the American Association of Individual Investors about how buy and sell orders should be placed:

  • Market orders are not used.  Instead, if the quoted bid-ask spread is less than 2% (ask price minus bid price, divided by ask price), place a limit order at the ask price for a buy and at the bid price for a sell.  If the bid-ask spread is more than 2%, try to place a limit order between the bid and ask prices to keep transaction costs low.  If necessary, build a position gradually.  With zero commissions, it is often better to place partial orders than to try to establish a large position all at once.  Be patient.
  • The average daily dollar volume should be at least 10x the amount needed for your position.  This will ensure liquidity to get in and out of the position, even if you need to grow the position gradually and sell gradually.  This will result in a varying number of qualifying stocks for each investor.
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    Fixed Income ETF Selection

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    Bucket 2 in the ETF Retirement Strategy is Fixed Income.  For this bucket, we attempted to pick a “best in class” ETF for each of the five (5) categories:

     

    Morningstar /Schwab Fund CategoryETF
    Long Government BondsEDV – Vanguard Extended Duration Treasury Index Fund ETF Shares
    Emerging Market BondsEMB – Shares JPMorgan USD Emerging Markets Bond ETF
    Municipal BondsMUB – iShares National Muni Bond ETF
    Long Term BondsVCLT – Vanguard Long Term Corporate Bond ETF
    World Bond – US HedgedBNDX – Vanguard Total International Bond Index Fund ETF Shares

    As with the Equity ETF’s, our desire is for the asset correlation to be less then .70.  read more

    Equity ETF Selection

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    As I shared in a previous post, Mark and I have been on a journey of selecting a portfolio of ETF’s to include in the modified three bucket approach.

    After various iterations and experiments, we have settled on a “Magic 8” as the Equity portion of the portfolio (our buckets 3 and 4).  At the core of the eight (8) are a set of five (5) sector ETFs from George Dagnino with one substitution: read more