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No. of Recommendations: 1
Going through the last 20 years with a focus on the seasonal indicators, especially for a 529 account that only allows 2 trades per year.
I saw the rules laid out by Mungofitch and saw that he used the 5 and 17 EMA.
But then I found some links pointing to a 10 & 42 EMA.
1. What's the difference?
2. Has the seasonal effect still been working?
No. of Recommendations: 5
Navigating a 529 account with the Bear Catchers require a much higher degree of finesse.
Because of the additional constraint the account imposes - ie limits 2 trades /per year. And MORE IMPORTANTLY the prospect of a 10 Yr ( avg) fixed time horizon - you typically want the account allocation to meet the College expense threshold and switch to a very conservative allocation ( for most its the Vanguard Defensive/Safe) about the Senior year.
Yes - the prospect of a simple Seasonal switch is tempting - ie hold the Bullish months and stay out the softer months - but over a LT both periods have a positive expectation.
I once many years back ran a Spreadsheet to simulate ranges of outcomes for my daughter's 529 .... a few pointers
(1) The KEY to understand is the 2 components : Your regular/monthly contributions - and their allocation. [ This you have very good control and practically no limit other than monthly switches]
And the total account balance which is subject to the 2 rebalances /yr rule.
(2) NH-NL is the FASTEST of all bear catchers - by DESIGN. While DBE is the SLOWEST - ie most delayed of them
IIRC - A DBE type exit combined with a NH-NL rising strategy was the most appropriate. This was you DONT rebalance often - Only when the perceived risk is high enough.
While you can use the status of the NH-NL can dictate your new funds. I dont think they necessarily beat out B&H - but would have put you on better Probabilistic outcomes in terms meeting the College goals - eg If you were unlucky enough to Start in 1997-98 and needed it 2008-2009 - you would have been taken to the cleaners with B&H.
Because there's a POINT OF INFLECTION in this also - initially your contributions matter the most and then as you are coming close to the impending need - the balance.
A 529 is actually a Defined Target/Maturity Balanced Equity strategy - the constraints make it a much HIGHER COMPLEXITY problem.
Hope this helped!
No. of Recommendations: 0
BTW most fund managers have realized this and have options of Target Dating - ie they automatically switch from Aggressive Equity to Balanced Bond and then Stable Value as it closes on target date of need.
That being said - that is simply a better risk optimized B&H - if you use Bear Catchers etc - YOU WILL/SHOULDN't use them - because your premise is to do Risk ON/OFF - so you want to be FULLY AGGRESSIVE when Bullish and fully defensive when not.
Hope that made sense!
No. of Recommendations: 0
It does. She's a sophomore in college and received a full academic scholarship. She uses 529 to pay for living expenses and will save the majority for grad school.
Used NHNL in 11/21/to go to cash and with bull switch been thinking about what to do next. Don't want to miss out in PY3 but have to think about only 2 trade limit.
Thanks for your advice. Food for thought.
No. of Recommendations: 1
You actually have a COMPLETELY different problem.
Conservation of balance should be paramount really - but one cant dictate risk appetite for others.
FWIW ..... My daughter's is completely switched to safe since she's a freshman. While on the other hand we have a UTMA brokerage - and much better control over it. Which is what I used for BCC switching.
In your case I think you should cover for first year of Grad school expenses. Which gives you a 3+ year horizon.
The balance if you utilize to switch as Risk On/Off - provides you with a cushion as well opportunity for future returns.
Does that make sense?
best
No. of Recommendations: 1
Yes it does. I've thought of treating her as a high school sophomore since we are looking at 2.5 years away until grad school.
She's built a substantial sum and preserving her wealth seems to be the wisest course of action since there's a limit to the number of switches available.
Once I have a clearer picture of where she's headed then I can decide on what to do next.
Thanks for sharing your thoughts!
