No. of Recommendations: 6
Drond, good work, good discussion. I deserves to be pulled out into its own thread.
I'm going to have to print it out so I can look at it closely.
A few quick comments:
* These momentum strategies belong in a tax advantaged account, not in a taxable account. Preferably in a Roth because the gains will never be taxed. The ongoing tax friction in a taxable account will kill you.
* Re timing: "We don't have to be perfect, all we need is to be good enough."
"Roger Nusbaum:
I don't really think it matters which trigger is used as no single trigger can be the best for all times but they can be effective which is the priority as I see it. Here effective is simply defined as avoiding the full brunt of a large decline. Aside from my belief in its effectiveness, the 200 DMA is simple to explain and understand."
Ken Fisher says "The Two-Thirds / One-Third Rule: Major bear markets usually start slow and rolling rather than crashing immediately. About one-third of the total percentage drop happens in the first two-thirds of the bear market's duration, while the final vicious drop happens in the last third."
So your timing entry-point trigger does not need to be finely tuned. If anything, you should be slow on the sell trigger. So that you catch the large grinding declines without selling on normal volatility bobbles.
Just pick something that is easy to compute and arguably reasonable.
That being said, you don't need to mess with timing these screens at all _IF_ you are going to do it long term and can stomach the large declines.
Turning $10,000 into $257,000+ in the last 20 years is something, even with a -58% drawdown along the way.
* "PHL vs RS Redundant ... Two proxies for one quantity"
Yes. For today, 3 of the top 5 and 6 of the top 10 are common.