Market Musings 290325: Stock market ETF timing with the high yield spread
Market Musings 290325:Stock market ETF timing with the high yield spread
This week, we are returning to the challenge that my friend Tony gave me. He is looking for a simple, fairly reliable system for investing for the long term without incurring high trading costs.
In designing an ETF portfolio system for Tony that can be easily followed month by month, we first need to set the objectives of any system that we're going to use consistently.
The biggest challenge for investors is typically themselves, and in particular their behavioural biases. Many people believe that they can time the markets, but this is in reality very difficult to do.
1. The goal of the system is not to optimise performance necessarily, but more to keep in line, or generate performance in line with the major stock indices when they're going up, but To reduce risk at times when the stock markets are going down. Simply said, the idea is to capture the majority of uptrends when they occur and to avoid the bulk of down trends when they occur. The idea of this is then to allow the investor to stay invested, using this...