Diamondjag Veteran  Posts: 123 Joined: 10/11/2012 Location: Brighton, Co.  User Profile | A comment by Steve Mayo on yesterdays OmniVest round table made a big impression on me. In Ed's notes today, he interpreted Steve's comments as, "Some of the input was especially powerful. Steve Mayo talked about his experiments, turning Portfolios ON and OFF based on simple examinations of the equity curves. I believe he said he doubled the results in his simulation by doing this." What I heard Steve say on the call was that his dramatic OV improvement came from switching to the best performing portfolio at the first of each month based on a moving average (I assume of the portfolios equity curve). In another post Steve said, "But, perhaps like classic technical analysis, it seems to me to be far more important to have automation that could switch to any higher-performing portfolio at the optimum time, rather than focusing effort on building the optimum portfolio to begin with. IMHO, simply (?) adding basic trendline or momentum indicators on the equity curve and supporting the ability to do automated port switching looks to be a far better near-term goal." I have an interesting example of portfolio switching. I use a program called "Dynamic Investor Pro" (the only other product I use other than Nirvana products). It is basically a relative strength program, keeping you in what is the strongest stock/ETF/or Mutual fund at any one time. You have your choice of different relative strength formulas. What I have found is even using the same group of symbols, different relative strength formulas give you vastly different returns in different years, regardless of the overall market return. Example: Using a relative strength formula called Price Oscillator with a mix of five non-correlated ETF's, the portfolio has already returned 18% this year, with the market down about -.4% (prior to today). Last year those same ETF's and same formula returned a -34% with the market up +29%. In 2010 they returned +36% with the market up just 13%. This is just one of many, many examples. I am now switching formulas in this program as returns change. You clearly can't depend on one relative strength formula holding up in all markets. I look at results weekly but may only switch once is several months or less depending on how things are going. Some portfolios remain the best all year long (only to fall apart the next year). And, you may have to totally stop trading and move to a different mix if none of the relative strength formulas are working with that certain ETF (or stock) mixture. The point....it is possible that we'll see the same with OmniVest, as Steve seems to be finding. For optimal returns, you may have to keep moving....staying in the Portfolios that are working at any one time (and this is not necessarily long to short portfolio switching). Switching can clearly get carried away by changing too often, but some portfolio switching could dramatically increase returns and...wouldn't it be wonderful if OmniVest could monitor the portfolios and do the switching for you. | |
