A loss of one and two thirds percent for the week. The strategy is now down 2.8% for the year. It’s holding up to the selling onslaught well though as the S&P 500 is down 28%. Nearly every other asset in the world is down year to date as well, except for government debt.
Below shows the performance since April 1st, 2019, nearly year over year. You can see how Geometric Balancing rises in sync with the market during good times, but with less volatility. During pullbacks ( May, August, and now) the strategy strongly resists following the market down. Collectively, this leads to superior returns, with fewer stress inducing losses.
Once again, expected future standard deviation rose over the week, but barely. Cash goes up slightly again, but the move is small. There is very little difference between this portfolio and the previous one. On March 20th, 2020, the strategy rebalanced to:
11% SPY , 19% TLT , 10% GLD , 60% Cash
Are you going to provide the details of this system at some point in say, a book or a course?
I would love to write a book, but I wouldn’t know where to start. Of course a little more than a year ago I didn’t know how to build a web page. Hopefully someday.
A chart showing weekly asset allocation overlayed by the above chart would be instructive. And maybe add *your* calculated volatility to it ?
Good idea, thanks. I’ll put that on one of the next couple weekly updates.
Very interesting blog. At this point, have the geometric returns turned negative? For example plugging in SPY @ 10% arithmetic return with 50% sd gives -2.5% geometric return ( 10% – 0.5 * 50% * 50% ) or have i misunderstood something here?
Thanks
Yes, that’s about right for stocks. I had it as more negative a week or two ago.
Would you ever consider starting an actively managed mutual fund or etf? I’d love to have something to buy and hold without having to constantly trade each week. More easily you could also create a quantconnect and maybe become rich (although us regular folk wouldn’t have access to the strategy).
The other large issue is from a tax perspective. Rebalancing weekly means you are always in short term gains vs long-term gains which is tax inefficient. That favors usage of an IRA. However, IRAs do not allow the use of leverage so you can’t maximize returns properly.
Personally do you follow similar strategies for your taxable margin account, IRA, and 401k or are they all invested differently?
Also Interactive Brokers let’s you write code to automatically trade for you. Have you ever considered that?
I have considered setting up an autotrader in IB, but havent’ done it yet. I feel like spending 15 mintutes each week to see where the portfolio is and what its doing is still very valuable to me at this point, so I’m still trading by hand.
See my post on Taxes. They are complicated, but maybe not all long term gains (depending on your own tax rules). https://breakingthemarket.com/the-certainty-of-death-and-taxes/