The money management is a bit more complicated. Sorry, have to leave now, later more.
There is indeed a fix percentage for a starting position, but as the leverage is moving that does not limit the number of stocks. Explain later, busy day today. The money management of this strategy is quiet complicated, but also rule based.
OK, hello back. This maybe of help:
Position size 6.0% equity (without unrealized gains)
Leverage: MIN(150% + ((SP500 high - SP500 actual) * 3), 300%).
sell:
margin 1 = without unrealized gains, margin 2 = with unrealized gains.
when over margin 2 sell until under margin 2.
when over margin 1 but still under margin 2 sell same amount as buying, but only if the position to sell is older than 6 months and not in buy list. If not donât sell, only buy.
The actual margin leverage is only 125.61% because there is a lot of unrealized gains. Actually the SP500 is very close to itâs all time high so the max possible margin leverage is 155.69%.
The actual liquidity is higher than one position size so I need to buy something the next 5 days. Except the SP500 gets closer to itâs all-time high.
Iâm interested about the technical side. How do you track your rules? Google Sheets, custom scripts, Excel,âŠ?
Also, you say âneed to buy SOMETHINGâ. Does that mean you leave some room and let your rules come up with a few options and then choose based on your feelings? I thought itâs all rule based, so you have no choice?
I use google sheets, unix scripts, vi macros (yes, old school) and a few internet pages that change over the years.
The status of my strategy did change to âbuyâ, so I soften my rules a bit for the time being. If I donât find anything to buy next week I will double down on a position I already hold. Actually all positions I hold which are still on buy.
No, my rules leave no options to choose. I did choose when I wrote the rules down.
As I said in the dividend strategy I have options because there are always enough companies to buy, companies that fulfill my criteria. But in the momentum strategy there is hardly ever a company to buy and when I find one I buy it, no (more) questions asked. It is fully mechanical.
Thanks for sharing. I couldnât really understand it and didnât want to burden you by asking for an example.
No problem, sounds more complicate than it actually is.
The point is to not use the actual value but the minimum of actual value and buy price. That way only realized gains will lift position sizes etc.
An example: your buy price is 100, actual price is 120 and for simplicity lets say the SP500 is at its high. That means 150% leverage. The position size is calculated from 100, without not realized gains. I can buy until I reach 150, 150% leverage of entry price.
If I sell everything the new base is 120. New positions will be 6% of 120 now, the margin is 180, 150% of 120.
The maximum margin leverage is 300% when the SP500 is at 50% of its last high.
Has been a while, so here a little update:
The dividend strategy runs nice, I could (or had to) reduce a little. Here is the actual wheel of luck for dividends and positions:
YTD performance is 4.28%, XIRR since 2014 is 10.51%. Actual carry premium is 4.29%. The margin multiplier is 100.39% meaning almost no margin used.
The momentum strategy runs a little worse and is more volatile in nature. The YTD performance is at -8.16% and the XIRR since 2020 is at 24.79%. The money management uses a higher margin multiplier when the actual SP500 is lower compared to its last high, it is at 142.07% at the moment.
Here is a table of my holdings and some relevant data:
And the wheel of fortune of my actual holdings:
Not even halfway to a âbear marketâ, actually the SP500 is at 93.8% of its last high. All my strategies made most money after a bear market, so I am not really afraid of one. It gets even a little boring because I always know exactly what to do and then just do itâŠ
And the stock market month is already over again. Here some data to my mechanical strategies:
Dividend: Performance YTD 0.29%, XIRR since 2014 10.07%.
margin multiplier 100.29% (almost no debt).
actual carry premium (cashflow) 4.29%
Wheel of fortune:
Now, my momentum strategy did worse this year, performance YTD -11.28%. XIRR since 2020 is still 23.69%.
Some data and the wheel of fortune of my positions there:
