where to invest now?

Kendall80

This article might sum it up for you;


http://www.telegraph.co.uk/finance/personalfinance/investing/11906471/Do-you-have-the-nerve-to-back-the-Bonkers-Portfolio-that-has-returned-3000.html

Sam_J12

AlanP wrote: »

I haven't looked into momentum much at all as I prefer a Passive approach but I must be missing something here as I can't see how this works to your advantage.

At the moment you are 100% Japan because that has done well over last 12 months but you re-evaluate on a monthly basis.

I guess that means you could be 100% in Europe for November and 100% UK for December and so on.

That sounds like a rule to avoid what may go up in the future and a way of being invested in what went up most over the last 12 months, along with only being in that market for 30/31 days at times before you change.

Like I said I must be missing something.

Yes, that is the idea. There are not as many switches as you might think - in Gary Antonacci's back testing there was just over one switch a year between his three assets of choice (Short term US bonds, S&P 500, World ex US). The idea is that you are more likely to be invested in what will go up in the future because contrary to what many people say, past performance is actually an effective indicator of future performance in the short term.

Kendall80 wrote: »

This article might sum it up for you;


http://www.telegraph.co.uk/finance/personalfinance/investing/11906471/Do-you-have-the-nerve-to-back-the-Bonkers-Portfolio-that-has-returned-3000.html

Extreme, but a nice illustration that momentum does work. If you look at the fundexpert.co.uk website they have done analyses which shows that this method works in most asset classes and markets and outperforms the benchmarks in recent times. USA is an exception, perhaps because of the efficiency of the market.

Kendall80

You'd have to be extremely lucky to hit the crest of the wave each time you switched. Still, if I tried it thats exactly what would happen

AlanP_2

I'll have a look. Thanks.

masonic

It's interesting that discussion has turned to a momentum based strategy at this time. It was around a year ago that a poster named Ryan Futuristics extolled the virtues of a value-based strategy developed by Mebane Faber, which was reported in the news at that time (http://www.thisismoney.co.uk/money/investing/article-2738966/How-use-CAPE-beat-market-global-CAPE-values.html). The strategy was backtested and over 20 years it returned a comparable amount to the strategy being discussed now. Faber launched an ETF based on this strategy, GVAL (listed in the US). To date, this fund has returned an impressive -24% return since inception. Of course, it is far too early to judge yet whether this fund will be a great success...

In fact, this discussion is very reminiscent of those past, except there aren't as many charts being posted in this one

Sam_J12

masonic wrote: »

It's interesting that discussion has turned to a momentum based strategy at this time. It was around a year ago that a poster named Ryan Futuristics extolled the virtues of a value-based strategy developed by Mebane Faber, which was reported in the news at that time (http://www.thisismoney.co.uk/money/investing/article-2738966/How-use-CAPE-beat-market-global-CAPE-values.html). The strategy was backtested and over 20 years it returned a comparable amount to the strategy being discussed now. Faber launched an ETF based on this strategy, GVAL (listed in the US). To date, this fund has returned an impressive -24% return since inception. Of course, it is far too early to judge yet whether this fund will be a great success...

In fact, this discussion is very reminiscent of those past, except there aren't as many charts being posted in this one

For me it isn't really comparable. Momentum as a strategy was first noted back in the 1930s, and has been repeatedly reported on since and it continues to work across countries and across sectors. I'm not trying to claim this is some kind of master strategy guaranteed to beat the market, but simply looking at performances in the previous 12 months (and other time frames) has been shown repeatedly, through both back testing and forward testing, to give an indication of what is going to happen in the near future. This suggests Japan is a decent bet right now, which was my original response to the OP.

masonic

Sam_J12 wrote: »

For me it isn't really comparable. Momentum as a strategy was first noted back in the 1930s, and has been repeatedly reported on since and it continues to work across countries and across sectors. I'm not trying to claim this is some kind of master strategy guaranteed to beat the market, but simply looking at performances in the previous 12 months (and other time frames) has been shown repeatedly, through both back testing and forward testing, to give an indication of what is going to happen in the near future. This suggests Japan is a decent bet right now, which was my original response to the OP.

In that case, it seems there are even more parallels. The first publication of value as a strategy was in the 1934 text "Security Analysis" co-authored by Benjamin Graham and David Dodd. There are also lots of publications showing it to work across a variety of markets and sectors.

Both strategies are well supported by peer reviewed literature. Of course, the devil is in the detail, and the precise implementation of the strategy is instrumental to the results, which is one reason why such a vanishingly small proportion of those highly intelligent city folk have been able to deliver the sort of returns suggested by the literature on a consistent basis. Perhaps you'll do better. Good luck. I hope at the very least that you won't be staring at a 24% loss in 12 months like poor Mebane Faber.

Edit: Since you indicated that you were making the suggestion of Japan as a "decent bet right now" to the OP, did you take into account that the OP stated right at the beginning of the thread: "I don't want to take on too much risk so a cautious fund would be ideal"?

Malthusian

Simulated backtesting is worthless. Did the geniuses behind the Bonkers portfolio actually invest in it over the last 20 years? Of course not. Anyone can look at the data from the last 20 years and pick a set of rules which result in amazing performance. There is no evidence that any of the thousands of people who've come up with the thousands of possible momentum strategies make money in the future.

The magician's trick with the Bonkers portfolio is that funds are switched every six months, and only into funds over £50m in size. Why? £50m is a very arbitrary figure - if you're worried about manager permanence then £50m is not very large, and if you're comfortable enough with that level of risk, investing in a £40m fund shouldn't worry you at all. And why six months? If momentum works, why not three months (following the typical reporting calendar)? Or one?

The answer is staring us in the face: because when they ran the data without the £50m rule, the portfolio didn't perform as well over the last 20 years. So they changed the rule and ran it again, and kept going until they had a portfolio with a 3000% 20-year return. This is all you have to do to generate an amazing portfolio, just keep changing the rules and re-running the simulation until you find a portfolio that performs brilliantly. It's the investing equivalent of a quack scientist changing the parameters of the experiment until he "proves" that homeopathy or telekinesis works - until he gets the result he'd already decided upon before he started.

This is how momentum investing works. It's a brilliant strategy provided that you have a time machine so you can go back to the beginning of the timeframe where that particular momentum strategy made money.

There is a reason all articles about momentum investing read "When we tested this portfolio using data from the last 20 years..." and not "As a successful fund manager / wealthy investor who has used a momentum strategy for 20 years, here are the returns I have made..." And it's not because momentum strategies have only been invented in the past few years - they have been in use for a century.

tejero23f

Update-Sell High-Buy Low

In my last post October 2015 i listed my investments (as below) which i picked purely from reading moneyobserver, the times money section and the fund expert web site.



My funds were as follows for anyone interested-

First State Pacific leaders 25%
Fundsmith Equity25%
CF woodford 25%
Standard life Global Absolute Return Strategies 10%
jupiter India 6%
Henderson European Growth 6%
Neptune Russia and Greater Russia- around 3%

Since then i have switched standard life no profit/loss to AxA uk smaller companies,

Switched Neptune Russia and Jupiter India at profit again to Axa uk smaller companies.

Everything is at a loss except Fundsmith

I will hold on to everything and now buy the following on Monday-

1) Artemis Global Energy- Bp predict $100 a barrel by end of year..only one way to go!

2) Jupiter India- 14% drop in 2 weeks-believe it will bounce back just as quick

3) Investec global gold- Get on this train quickly, then leave at the next stop in Pocket

4)Considering more CF Woodford if further drops

This Train ride is pretty exciting at the moment!!

Next update...April

Cheers

Thrugelmir

bigfreddiel wrote: »

Equities are bouncing back nicely now, glad I didn't sell up because i would have missed it, not to mention the cost of selling and buying, and the losses you take selling on the downturn, not to mention the gains you miss on the upturn.

Posted 13th July 2015.

As investors we know nothing. We are just pawns in the game.