April 6, 2020: Long Term Stock Market Timing Since 1871 Revisited
by MyPlanIQ | Apr 7, 2020 | Asset-Allocation, Bonds, Economy, Feature, Gold, Headline, Income, Inv, Investments, IRA, Markets, Mutual-Funds, newsletter, Portfolios, Retirement
Re-balance Cycle Reminder All MyPlanIQ’s newsletters are archived here.
Regular AAC (Asset Allocation Composite), SAA and TAA portfolios are always rebalanced on the first trading day of a month. the next re-balance will be on Friday May 1, 2020.
Please note: As of March 1, 2020, we officially phased out our old rebalance calendar for both SAA and TAA. They are now always rebalanced on the first trading day of a month.
As a reminder to expert users: advanced portfolios are still re-balanced based on their original re-balance schedules and they are not the same as those used in Strategic and Tactical Asset Allocation (SAA and TAA) portfolios of a plan.
Long Term Stock Market Timing Since 1871 Revisited
It’s one of our core beliefs that a sensible long term stock market timing strategy can reasonably improve investment returns and dramatically reduce risk. We have regularly reviewed a simple 10-month simple moving average based timing strategy over S&P 500 index. For the recent review, please see April 24, 2017: The Long Term Stock Market Timing Return Since 1871.
It’s certainly interesting to look at the updated data in light of the recent market stress induced by the coronavirus pandemic.
A few words on the data: we take S&P 500 composite data from Shiller’s famous site and among the S&P 500 monthly data (dividend, price), we perform a 10-month moving average over the composite’s total return series: when the S&P 500 total return is above its moving average, it invests 100% in the index, otherwise, it just retains the previous month’s value (that means it derives 0 interest from cash generated from selling S&P 500). Technically, this strategy is different from a pure S&P 500 price based as it relies on its total returns. This strategy actually underestimates returns in some meaningful way: in a real world implementation, when the index is under its 10-month average, one can at least invest in cash (i.e. money market) or better yet, invests in a bond fund such as an intermediate Treasury bond fund or better yet, invest in a good fixed income strategy such as those on our Fixed Income page when not holding S&P 500 index.