Risk and Return Comparisons: Using StockTiming Trending Index Signals
Versus a Buy and Hold Strategy From
December 18, 2003 to December 8th. 2004 ___________________________________________________________________________
Paul Hooper, President of Marketracker Capital Management Inc. was kind enough to run the Risk and Return analysis for our StockTiming Trending Index Signals versus a "Buy and Hold" Strategy. The results are presented below:
In this Analysis, Mr. Hooper took the 5 Buy/Sell Signals for our StockTiming Trending Index Model (STTI) between December 18th, 2003 and December 8th. 2004. (The STTI Model has since been renamed to the Super Accelerator Model)
He compared the total returns of these signals versus a Buy and Hold Strategy for the same period. As you will see below, he did it for the SPY, QQQQ, and 6 Mutual Funds offered by ProFunds. For each investment below, the Green bar represents the Timing Signals of our STTI Model, and the Blue bar represents the total return for Buying and Holding each investment.
As you can see, the total returns from our Timing Signals generated more profit except for only one, which was the QQQQ that came in 1 tenth of 1% less than the Index. The extreme was the Russell 2000 2 Beta Fund which had a result of 38.7% versus only 29.1% for a Buy and Hold strategy.
While these are positive in accomplishing our first goal, the second goal is probably more important ...
and that is in reducing Risk and Volatility in a trade. (See chart two.)
A Comparison of Risk/Volatility ...
In measuring Volatility and Risk, Mr. Hooper measured the Standard Deviation of Volatility for each of the above. The lower the Volatility/Risk number, the lower the risk in an investment. A reading of 4 and under is Low and is considered excellent by Investment Managers. An investment with a reading above 9 is considered Very High Risk and has substantially higher volatility and draw downs compared to a 4.
From the Study below, you will note that in all cases, our Timing Signal's Risk Levels were far less. This shows that the Risk Levels were much less and in 3 cases, the Risk was lowered from Moderate to Low. (Low being a level under 4 that is regarded as excellent.)
These first two charts illustrate higher total returns with much less risk.
In the above analysis, Mr. Hooper calculated the time investors would have been out of the Market using the StockTiming Trending Index Signals which came to be 39% of the time during that period.
In other words, the two above analyses had an investor in the market only 61% of the time and out 39% of the time. In chart one above, Mr. Hooper's total returns assumes that one was in a Money Market Fund during the 39% period. (He used Vanguard's VMFXX Fund which earned about 4 tenths of 1% during that out-of-market period.) This out-of-market period allows one to make other investments during that time such as Money Market Funds, Shorting the market etc. Also, by being in Cash or a Money Market Fund during these times, investors were avoiding market periods where their capital would be under much higher risk of capital losses and severe down swings.
StockTiming.com is not for everyone for the following reason: Some investors get "trading boredom" because they like to be in and out of the market daily or weekly. In that one year period above, there were only 5 trades, and 39% of the time, funds were out of the market. Many people like "high trading activity" in the market, looking for the next "hot stock" that makes a million dollars. They only real question is could you have made more with less risk on your own?
So, if preservation of capital is important, along with lower risk and higher possible returns then our service may make sense for you. If you are patient, and don't mind being out of the market when our models show risk/reward levels are poor and risky ... and 4 to 6 trades in a year won't be boring to you, then consider it. For more information, please see this link ... Membership Options ... you can even sign up for a Free Membership.
The Funds and Symbols for the above Analysis ...
The Funds measured where part of the ProFund series and for reference, their symbols and what
they represent are below:
The StockTiming Trending Index Models are used on the S&P, QQQQ, and the broad market indexes and are available in the Daily Updates and Analysis for paid Subscribers.
Posted on: March 4th. 2005.
NOTES: Standard Deviation is a measure of risk. Higher standard deviation means higher risk. Total Returns do not reflect commissions and/or transaction fees from Broker Dealers and do reflect being in a Money Market Fund during the periods after a Sell Signal avoiding higher market risk conditions.
Disclaimer: Past performance is not a guarantee of future results.
As with any investment, the potential for loss exists as well as the opportunity for profit.