High yield bond fund, also known as junk bond fund could be timed using some simple timing strategy to enhance the return while reducing the volatility. Unlike The 125 05 Timing Model of High Yield Bond Strategy by Gerald Appel, this strategy allows parameters for users to select a buy and sell stop of their own.

1. Start recording the price of your chosen bond fund every day, always keeping careful track of the lowest price you have recorded. When the fund reaches the buy stop you can accept above that low, consider that you have received a "buy" signal and invest in the fund.

2. Keep recording the fund’s price every day, but this time make a note of each new high price. When the fund price drops to a certain percentage (the sell stop you set) of its highest price since you bought, you have a "sell" signal. Move your money into a money market fund. Now start the cycle again, and buy back into your bond fund when it reaches a certain percentage of the lowest price since you last sold.

3. Be sure to adjust for month-end dividend distributions and year-end capital gains distribution.

Performance:

Comparative Results of Buy-and-Hold vs. Market Timing on Vanguard High Yield Bond Fund (VWEHX) and T. Rowe Price International Bond Fund (RPIBX) for the Period December 31, 1986 through December 31, 1993.

Similar Strategies in ValiFi:

1. Market Timing Rule with Short Term Interest Rate: using the short-term interest rates as an indicator 
2. Market Timing Rule with Maturity Spread: using the spread of long-term and short-term interest rates as an indicator 
3. SMA Timing Method proposed by Faber: using the SMA of the target asset as an indicator
4. The 125 05 Timing Model of High Yield Bond Strategy by Gerald Appel: using  predifined trend  triggers (percentages from recent high or recent low) of the asset price for buy and sell decisions
5. Market Timing Rule with Long Term Interest Rate: using long-term interest rate as an indicator
6. Market Timing Rule with Earning to Price Ratio: using the E/P ratio as an indicator
7. Market Timing Rule with Dividend Yield: using the dividend yield as an indicator
8. Market Timing Rule with Expected Inflation: using the expected inflation as an indicator
9. Market Timing rule with Implied Volatility Index : using the implied volatility index  as an indicator  
10. Market Timing Rule with Bond-Equity Yield Ratio : using the bond-equity yield ratio as an indicator 
11. Market Timing Rule with Dividend Payout Ratio : using the dividend payout ratio as an indicator 
12. Market Timing Rule with Credit Spread :  using the credit spread as an indicator
13. Market Timing Rule with Put/Call Ratio:  using the put/call ratio as an indicator
14. Learning Market Timing Rule: following the most profitable rule of the above simple market rules in each period 
15. Voting Market Timing Rule : Switching the position if a certain percentage of the above simple market timing rules intends to do so.

See Also

• Paul Merriman, "All About Bonds", FundAdvice.com. November, 29, 2000.
  
• Paul Merriman, "The Myths and Realities of Market Timing", FundAdvice.com. June 29, 2005.
  
• Gerald Appel, "Opportunity Investing: How To Profit When Stocks Advance, Stocks Decline, Inflation Runs Rampant, Prices Fall, Oil Prices Hit the Roof, ... and Every Time in Between ", Chapter 5 "Securing Junk Bond Yields at Treasury Bond Risk",  P141-144. FT Press, September 11, 2006.