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portfolio risk

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.

Hedging Your Mutual Fund Portfolio - Why Hedge Your Portfolio?

What do farmers and airlines know that you don’t?

So far in our series on managing risk we’ve taken a look at market timing and portfolio diversification as two powerful techniques to control risk in our mutual fund portfolios. In this article we’ll take a look at the third and final one: hedging.

Bear Market Investing - Hedging with Mutual Funds and ETFs

In previous articles we covered the possible advantages of hedging your portfolio as another way to reduce risk. This time we will cover a method to do exactly that using only mutual funds or ETF’s that can be purchased in a cash brokerage account.

Historically to hedge you had to sell short shares of an ETF that tracks the market, like SPY or QQQQ, or to buy put options on the major indices. The problem with that is that it requires a margin account, which eliminates most retirement accounts, and many retail accounts. Plus many people have this innate fear of short selling, and are concerned that they could lose more than they invested if the markets were to take off.

How Much Do You Need to Retire - It May Be Less than You Think

Recently we’ve gone series on risk management for our portfolios, it seems that it would be interesting to go back and look at how much you need to retire if you apply some of these techniques.

The full story on the assumptions behind the conventional wisdom can be found at our previous article on how much you need to retire.

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.

How Much Do You Need to Retire? Adjust Your Portfolio to Need Less

If you’ve ever looked what kind of nest-egg you are going to need to retire, you’ve undoubtedly come across the standard rule of thumb only allows withdrawing 4% a year if you want to have your savings last at least 30 years.

So if you wanted to start withdrawing $80k a year, you would need to have $2 million dollars in savings. Now that is a mighty sum, and many may consider it out of reach, especially if you are starting late in the game.

Measuring Portfolio Risk - Risk Measurement for an Average Investor

In some other articles we discuss the impact that risk can have not only on your ability to invest with a system, but highlighted the fact that the risk of the portfolio can have more impact on the sustainable withdrawal rate than the actual average rate of return.

Building a Diversified Portfolio - The Best Mutual Funds

In another article we looked at managing risk (as measure by the standard deviation of returns) by combining funds in our portfolio that were uncorrelated, (that is they don’t track each other very well on a day to day basis.)

How does this work out when applying it to a typical mutual fund portfolio?

Let’s start by taking a quick look at one of the standard examples.

Our Best Diversified Mutual Fund Allocation

Here we take a look at techniques you can use to build our best diversified mutual fund allocation, which helps manage the risk in your mutual fund portfolio.

In other articles we found that using uncorrelated funds assembled in a portfolio gave us a powerful tool to manage risk, while maintaining good portfolio returns.

Low Risk Funds - Hedge Mutual Funds Work to Lower Risk

This article on hedge mutual funds was originally published in 2006. Many of these hedge funds have done reasonably well in the recent market tumult, and it may be time to look into these funds again.

In today’s volatile markets we are always looking for ways to increase our portfolio returns while limiting the downside risk in our investment portfolio as well. There are many more options to do so than even just a few years ago. One recent development are mutual funds that are not structured like typical long only mutual funds. These are funds that don’t invest solely in stocks and bonds.

Hedged Mutual Fund Portfolio to Manage Portfolio Risk - Diversification May Not Be Enough

A day like today in the market can make it painful to look at your mutual fund holdings. For example, of the Fidelity Select funds that we track, they were all down anywhere from 0.41% to 3.24% It’s clear that in order to manage mutual fund portfolio risk, diversification alone will not do much on a day like today, when everything is down. (This is an example of what is sometimes referred to as negative co-variance, where market instruments like mutual funds and ETFs tend to be uncorrelated on the upside, but when bad news strikes, they have a greater degree of correlation (i.e. they all go down at the same time).

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.