This Combo was presented as an example to demonstrate the risk reduction when combining simulation models with Best(SPY-SH). It was not an invitation to subscribe to the stock models at P123. The Combo is not available for subscription at iM, but could be simulated in a “book” at P123. This would require a membership at P123 and subscriptions to the relevant R2G models as well.
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This binary model switches between SPY (SPDR® S&P 500® ETF) and SH (ProShares Short S&P500 ETF) depending on market direction. Using a web-based trading simulation platform, our ranking system, and specific buy and sell rules, this model would have produced an average annual return of about 27.7% from January 2000 to middle of August 2013, versus 2.8% for a buy-and-hold investment of SPY over the same period.
An algorithmic market timing system has been developed using the SPY (the ETF tracking the S&P 500) to generate trading signals for the stock market. This is a binary model – either IN or OUT of the market. This trading system produced 4 times more value than a continuous investment in SPY over the period from Jan-2-1999 to Aug-15-2013
In a previous article I demonstrated that one could obtain a CAGR of 35% over the last 14 years by using a ranking system, and periodically rebalancing one’s portfolio to hold only the 10 highest ranked stocks of a S&P 500 stock pool. This article demonstrates that a CAGR of 50% over the same 14 years could be achieved by removing poor performing stocks from the S&P 500 pool and adding high performing stocks and applying the ranking and trading algorithm to a pool of 429 stocks
The S&P 500 has notched up significant gains over the last year. But looking a bit further back then the performance of the stock market is dismal. A 1999 investment made in SPDR S&P 500 (SPY) has only produced a negative real compound annual growth of -0.3%, with dividends reinvested. However, one should get much better returns by following the signals from a well constructed portfolio optimization system, which according to my analysis would have produced real average annual returns of about 30% in the past.