Portfolio Allocation Timing Models

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Nomad
Posts: 120
Joined: Wed May 16, 2018 5:23 pm
Location: UK

Portfolio Allocation Timing Models

Post by Nomad » Sat Jun 08, 2019 11:30 am

Hello there
In the past I've favoured a fix asset class percentages in a portfolio.
However, I've been playing around with market timing models on a website https://www.portfoliovisualizer.com/tes ... ingModel=4
Basically, you take money out of asset classes when they aren't doing well and put them into something that is doing really good.
You do this 'rebalancing' every month or quarter etc.

Now, it sounds like a lot of effort but the results seem to be rather amazing, you don't succumb to crushing devaluations of a portfolio due
to a stock market crash - because these generally take a year to 18 months or more to hit the bottom.
Additionally, you are quick to jump onto any new band wagon - while the trend is being your friend.
Generally, you are only 'in' 3 or 4 asset classes at any one time.
Over a few years the gains over a fixed percentage portfolio are impressive.

Has anyone else been doing this and what works for you?

arcyallen
Posts: 87
Joined: Sat Jan 20, 2018 11:20 am

Re: Portfolio Allocation Timing Models

Post by arcyallen » Wed Jun 12, 2019 7:13 pm

Nomad wrote:
Sat Jun 08, 2019 11:30 am
Basically, you take money out of asset classes when they aren't doing well and put them into something that is doing really good.
If by "aren't doing well" you mean asset class has gone down in price and if by "doing really good" means asset class has gone up in price...isn't that selling low so you can by high?

As far as what's worked for me - not doing that :)

arcyallen
Posts: 87
Joined: Sat Jan 20, 2018 11:20 am

Re: Portfolio Allocation Timing Models

Post by arcyallen » Wed Jun 12, 2019 7:15 pm

(deleted duplicate post)
Last edited by arcyallen on Sun Jun 16, 2019 9:55 am, edited 1 time in total.

Nomad
Posts: 120
Joined: Wed May 16, 2018 5:23 pm
Location: UK

Re: Portfolio Allocation Timing Models

Post by Nomad » Thu Jun 13, 2019 5:01 pm

arcyallen wrote:
Wed Jun 12, 2019 7:13 pm
If by "aren't doing well" you mean asset class has gone down in price and if by "doing really good" means asset class has gone up in price...isn't that selling low so you can by high?

As far as what's worked for me - not doing that :)
It's more based on which markets have momentum. E.g. if the NASDAQ has been in a bull market for 12 months, you assume that it will probably stay
in a bull market for one more month. The alternative is to assume every current trend will someone reverse next month?
Using the website and picking say seven asset classes but only being invested in 3 at a time gives great results for historical data.

You can only lose money in a month where more than 1 of your asset classes changes from a bull to a bear market.
The month after that you would not be 'in' any of the asset classes that have reversed direction.
Last edited by Nomad on Thu Jun 13, 2019 5:12 pm, edited 1 time in total.

bigato
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Joined: Sat Mar 05, 2011 12:43 pm

Re: Portfolio Allocation Timing Models

Post by bigato » Thu Jun 13, 2019 5:09 pm

This is speculating and goes generally contrary to the usual way of rebalancing portfolios, that is sell whatever category is above the designed percentage of the theoretical portfolio, and buying more of whatever is below the designed percentage. I'm no judging whether this is a good thing or not nor if you should do it. Just noting that it is something else than the common strategy for rebalancing.

Nomad
Posts: 120
Joined: Wed May 16, 2018 5:23 pm
Location: UK

Re: Portfolio Allocation Timing Models

Post by Nomad » Thu Jun 13, 2019 5:19 pm

bigato wrote:
Thu Jun 13, 2019 5:09 pm
This is speculating and goes generally contrary to the usual way of rebalancing portfolios, that is sell whatever category is above the designed percentage of the theoretical portfolio, and buying more of whatever is below the designed percentage. I'm no judging whether this is a good thing or not nor if you should do it. Just noting that it is something else than the common strategy for rebalancing.
The common strategy for rebalancing is to have a fixed ratio of say 5 or 6 asset classes and to preserve the ratio come what may.
Alternatively, this is a dynamic strategy where you are only in say 3 of the 5 or six asset classes at any time e.g. the ones doing the best over
the last six month period.
Generally, markets keep going in the same direction for months if not years, then unpredictable stop and can reverse for months.

This even works on individual stocks like large cap stocks, I tried that too.
I would say that it isn't speculating, it would be speculating if I was better on things changing direction I'm betting next month is similar to the last few - generally that's true and that's why it works. Try it out with historical data.

bigato
Posts: 1834
Joined: Sat Mar 05, 2011 12:43 pm

Re: Portfolio Allocation Timing Models

Post by bigato » Thu Jun 13, 2019 5:25 pm

In order to properly evaluate this strategy, you need to stablish exactly what the rules are and how to apply them, and then you need to run simulations pretty much the way Tyler9000 did with his spreadsheets that then gave birth to his porfolio site. Only then you'd have reliable estimations of how effective the strategy would probably be in the future.

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