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 donāt 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 itās 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 itās all-time high.
Iām interested about the technical side. How do you track your rules? Google Sheets, custom scripts, Excel,ā¦?
Also, you say āneed to buy SOMETHINGā. 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 itās 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 ābuyā, so I soften my rules a bit for the time being. If I donāt 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 couldnāt really understand it and didnāt 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 ābear marketā, 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 itā¦
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:
And the markets rallye. Donāt understand why, but fortunately I donāt need to. Probably a sucker rallye but it does not matter.
I might encounter a first-timer and I donāt like to make decisions in new situations; I like to plan ahead. So I did plan:
If the index and my portfolio reach 95% of last high the bear market is over and I will not implement the crash recovery protocol. That means no stock is bought on credit in the dividend portfolio, in both portfolios normal operation resumes. It makes no sense to implement a crash recovery if the crash is already recovered.
Had a nice Alpha during this last time, less loss and more gain than the index. I could have hedged with index futures and would have made money on the way down and up. But to make more than long-only one needs a lot of margin multiplier and that rises the risk. So it is less risk, less gain or more risk more gain. But hello, I am very satisfied with my level of risk and I can stand the volatility.
How do you know when the risk is right? You make a lot of money and you sleep at night.
Almost another month went by and the whole bear market looks like a storm in a glass of water. I have some bear market protocols still in effect until the market gets over 95% of its last high, but that looks very close now.
My dividend strategy is currently at a YTD loss of 1.26% and CAGR/XIRR since 2014 is at 9.84%.
My momentum strategy is at a YTD loss of 10.77% and CAGR/XIRR since 2020 is at 23.41%
I stopped buying but still sell. When the market hits 95% of its last high I resume normal operation.
Here is the dividend and the positions wheel of fortune for the dividend strategy:
And here are the positions of my momentum portfolio and a table of some data:
The bear market protocol is still active. My leveraged momentum strategy mandated a sell, what happens every first trading monday of the month while this protocol is active.
Yesterday I sold Greenbrier with a little loss of 2.45%. Was quite a big position.
Probably tomorrow we will get over 95% of the last high of SP500, then the bear market protocol is over. Otherwise it stays active, it is my own mechanical take on market timing.
I never like to sell. It would take years until I would have sold every last position, one a month. But then it is about survival, survive to trade another day and being ready to make tons of money in the recovery.
In the dividend strategy I donāt need to sell as I donāt use leverage. But in the recovery phase I will use leverage as defined by my rules earlier, the crash recovery protocol.
Reminds me of the Margin Call quote: āSo that WE may survive.ā
And this was probably a storm in the waterglass. Today the SP500 reached over 95% of its last high. The bear market protocol in my strategies is therefor over and normal operation resumes.
Start with some buys for investing the dividends in the dividend strategy: VTRS, T and GILD, raised each of those positions 5%.
Sell in May and go away? Nah, would be the worst decision ever. My strategies run perfect, made tons of money and I am currently very close to my all-time high.
The dividend strategy is currently at a margin of 101.05%, very little debt, mainly so I donāt have to act every few days when dividends fill my Zasterlaster.
This month I sold Nucor after more than a decade. I bought APAM, Artisan Partners Asset Management. A risky play, but I can take on a little more risk as currently I donāt live off this portfolio any longer. The momentum strategy has taken over my costs of living as it has taken over the value of the holdings too. The performance difference is just too big, compounding in action.
The wheel of fortune for my dividends:
ā¦ and of my positions:
The performance YTD is 1.92%, the XIRR since 2014 is at 10.07%. I calculate the XIRR since 2020 too, as that is when I started the momentum portfolio, it is at 12.36%.
Now the momentum portfolio runs like hell. All the risk I take there pays out very good. This is the table of tables for my holdings:
And the wheel of fortune:
Margin multiplier is at 142.27%, Performance YTD 3.53%, XIRR since 2020 26.3%
A remark to the momentum table: google finance sometimes has problems to fill in the correct values. I stopped writing them about it, it usually took them 9 months to fix any problem. So whenever I have a problem like now with Allstate I just fill in the value manually and then paint it in red.
I keep getting messages from google about artificial intelligence, but sometimes I got the feeling they should first check natural intelligenceā¦
You get what you pay for with Google ā¦ *
Tongue in cheek, of course, Not a stake or shareholder anymore.
Sorry, seems to be one of the many forums where all the youngsters invest in index funds and are absolutely not interested in any alternatives.
Index funds do not represent an average, they are biased by the committee that chooses the content. As an example the SP500 committee did violate or change its own rules twice and it was always at the top of a bubble. Much unnecessary losses for whoever did chase the āaverageā.
Now, active investment is even worse. While the index guys fall for some psychological traps, whoever does choose single investments does more so. Sorry, we are cavemen. Whatever did good to make us survive does very bad for us as investors.
My way is as always for a good Swiss, a compromise: I define rules that are very difficult to adhere to in āhotā situations. And then I just adhere to those rules.
It is just a bit of work to present the monthly statistics here and it seems nobody cares. Especially as I am travelling at the moment. Probably I change to yearly statisticsā¦
since you didnāt provide the rules, itās hard to derive much meaning from the monthly changes.
if someone says, āiām buying X because of x,y,zā you can have some discussion on that. if you say, āiām buying x because of some secret rulesā thereās not much that can be said about it.
I care. 
Totally understand if you donāt want to post monthly just for me. 
And yes, most people here believe in index investing. Which is fine.ā I started out that way, too, once I got serious about investing. Literally (almost) any āseriousā investment book tells you to do exactly that.ā ā And theyāre probably right, given most serious investment books are geared towards beginners (IMO).
Maybe only once you get closer to retirement, i.e. having to actually consume cash flows from investments, people open up to thinking about alternatives to āVT and chillā as theyāll actually have to sell VT and it then becomes harder to chill ā¦ and most people here seem still many years away from retirement, whether early retirement or not.
I kind of believe that it doesnāt matter much what the rules are, as long as you have the conviction to adhere to them, no matter what. I personally find it interesting to observe how @cubanpete_the_swiss manages to stick to them and now even favors his momentum portfolio over the dividend portfolio for income/cash flows.ā”
Building the conviction is probably impossible by copying someone elseās rules ā at least I canāt do it ā but coming up with your own set of rules requires actual work. The (investment part of the) forum, however, is mostly chit-chat and opinions.ā”ā”
Of course, thereās still lots of value to be found in the forum, especially when it comes to practical advice on how to do task X at broker Y, etc. Actual return strategies? Not so much, IMHO.
Um, the point of a rules based approach is to not have a discussion? Unless maybe you bring some experience to the table with your own set of rules that you adhere to strictly. Not to criticize you personally, but do you have a strict set of rules that you mechanically adhere to and that you have published here?
Anyway, happy investing everyone, I for one appreciate the updates, even if just looking at the tickers in each investment approach by @cubanpete_the_swiss and catching myself nodding, shaking my head, or occasionally encountering a company that makes me go āHmmmā.
[ā ] Except ā IMO ā for those remarkable fellow forum members who, ahem, actively choose ETFs based on their macro view/feelings and āre-balanceā ETFs based on market timing thoughts ā¦
[ā ā ] Perhaps with the exception of one of the first real investment books: The Intelligent Investor, of course.
And then thereās also Peter Lynch.
[ā”] Something for which I not only donāt have any conviction, maybe even ā¦ negative conviction.
But it seems to work for @cubanpete_the_swiss ā¦ so, who am I to critize the approach.
[ā”ā”] Which is totally fine by me! And I like it, too. Itās just mostly a not so serious discussion about different investment approaches, at least from what I seem to read.
Exactly. Thatās why I donāt think it is unsurprising that there are not so many comments on the monthly updates. I read and observe them and note similarities to my own picks, but thereās not much to discuss.
I interpret this lack of discussion might have lead to the ānot caringā comment which is the reason for my posts above.
