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market timing

Best Time to Invest in Mutual Funds - The Best Months to Invest

When is the best time to invest in mutual funds, or the stock market in general. Because of the redemption fees on mutual funds, it can be harder to use market timing to manage the risk in your portfolio. But there are some seasonal influences that can be used to your advantage to help you decide when it’s best to invest in mutual funds, and when to go to cash.

Dow Theory - History of Dow Theory Stock Market Timing

One of the earliest examples of stock market timing was the Dow Theory. Dow Theory Market timing is actually pretty straightforward, but it’s complicated a little by the variations that have been added to it over the years. Here’s a quick history of the Dow Theory timing system, and where to find information on trading it today.

Fosback Seasonality Timing System

We would all like to have some edge when it comes to the markets. We have discussed some stock market timing approaches as one way to mitigate the market risk. However, one limitation almost all these market timing systems have is that they are the result of some type of backtesting or simulation. The result is that while it may look good on paper, it’s difficult to have much confidence in their real time performance until they develop something of a track record.

Free Trading System Software

We’ve gone through the development of a price based mutual fund trading system. We’ve taken a look at the requirements for the data feeds for our mutual fund trading system. But what kind of trading system software can we use for this system? Is there some free trading system software we can use?

Mutual Fund Trading Systems - The Importance of Your Data

We’ve just written about using recent price performance as a way to build a trading system for mutual funds, specifically in this case the Fidelity Select Fund trading system. So, given that the integrity of the whole system is built solely on the price information that we have available, it would be no surprize to find that the integrity of the data feed is very important. The good news is that you can find mutual fund quotes on loads of web sites, so this is really of little concern. Well, that’s not quite true.

New Market High - So Buy and Hold Works?

Today the market as measured by the S&P500 made an all time high. It finally eclipsed the high set in March of 2000. We are happy to see that, as all our systems are either at new all time highs or withing 1% of it as well.

Of course, what that means is that over the last 7 years, if you were invested in the grandaddy of all index funds, the Vanguard 500, even reinvesting the dividends the total return was just slightly less than the return of Fidelity’s money market fund FDRXX, but included a much more exciting drawdown of almost 50%. So what have the markets done over the last 10 years?

Sector Rotation with Fidelity Select Funds | Rotating to Cash

There are some times when there are no strong sectors for our sector rotation to work with. 2002 is an example of one of those years when nothing seemed to sustain any strength. Those are the times when a sector rotation strategy may still produce returns greater than those of the market, but in a year when the market is down more than 15%, that may be of little comfort.

Choosing the Best Mutual Funds | Why Worry About Volatility

As we noted last time, just using price change as the way to make our selection of the top Fidelity Select Fund, has historically been profitable, but can be volatile and have some breathtaking drawdowns along the way. We’ve also written in the past about the problems with volatility when trying to identify the best mutual funds.

As an example, take a look at the plot below. It shows some recent price action from FSVLX and FSCGX for about one month. As you can see, they both have about the same percentage price change over the last month, but the red line (FSCGX) is much less volatile, and just looking at it you would suspect that it is more likely to be in a true uptrend than FSVLX over this same time period.

39 Week Moving Average - Does It Still Work?

There was another interesting article on Marketwatch today about the effectiveness of the old 39 week moving average as a market timing tool. You can read about it at Hulbert on the 39 Week Moving Average. The interesting thing is this was originally made popular by Doug Fabian in his old Telephone Switch Newsletter. His son, Dick Fabian, seems to have moved away from the basic tools made popular by his father, however, if you look at his track record, it seems that he would have been better served by sticking to what Dad taught him.

Seasonality

Lindsay at Wallstrip tackles seasonality….

Source: Michael Covel: Author of Trend Following

Sell in May and Go Away - Does it Work?

The first of May is upon us, and every financial journal seems to have some article about the merits of a seasonal strategy for getting in and out of the market. While there is something to be said for it’s performance long term, we’ve previously taken a look at the performance of seasonal trading with our portfolios, and adjusted it somewhat.