iM’s Improved Floor-Leverage Rule, a low-risk investment strategy for retirement with a high 5.7% withdrawal rate, uses market timing to avoid large losses of the Surplus Portfolio, and additionally uses a strategy to guard the Surplus Portfolio against black swan events, e.g. the 1987 stock market crash, by buying put options.
Blog Archives
More Retirement Income with iM’s Improved Floor-Leverage Rule: 6.5% Safe Withdrawal Rate
The original Floor-Leverage Rule for Retirement, as proposed by Scott and Watson, calls for two parallel investments. The first one is to establish a low risk Spending Floor Portfolio with 85% of one’s funds. The second, the Surplus Portfolio, is an investment of the remaining 15% in equities with 3× leverage. If the Surplus Portfolio exceeds 15% of the total portfolio value at annual rebalancing when withdrawals are made, it is adjusted to 15% of the total portfolio value with the excess being transferred to the Spending Floor Portfolio. The problem is that 3× leveraged stock portfolios can lose most of their value. For example, they lost 94% from 2000 to 2008, which would have wiped out almost 15% of retirement capital if one had followed the Original Floor-Leverage Rule. A better approach, and one that could avoid such losses, is to time one’s exposure to equities as put forward by our Improved Floor-Leverage Rule, which is a low-risk spending and investment strategy for retirees.
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Estimating Stock Market Returns to 2020 and Beyond: Update July 2014
July 7, 2014 About two years ago evidence was presented that a major bull market may have commenced in 2009. Additionally, a statistical analysis of the historic data of the S&P Composite presented in an Aug-2012 article and Jan-2014 update thereto supported this finding. Since August 2012 the S&P500 has now gained a real 40% to the end of June 2014. So what further gains can we expect, if any?
Minimum Volatility Stocks: Better Tax Efficient Returns also during Rising Markets
Minimum volatility ETFs should provide exposure to stocks with potentially less risk. They track indexes that try to capture the broad equity market with a reduced amount of volatility, seeking to benefit from what is known as low-volatility anomaly. Consequently they should show reduced losses during declining markets, but also reduced gains during rising markets. However, better returns with simultaneous tax efficiency can be obtained also during rising markets by selecting a number of the highest ranked stocks of a minimum volatility ETF and holding those positions for at least one year before new trades are initiated.
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Backtesting the MAC-System – How Long is Long Enough?
Most of us entrust our savings to financial organizations in the belief that this will provide us with better investment results than we could have achieved ourselves. These companies advocate a buy-and-hold strategy of bond- and stock funds, charge fees, and usually perform poorly. A convenient way to improve on buy-and-hold and to do better than financial organizations is to periodically switch one’s investment from stocks to bonds and vice versa as indicated by the Moving Average Crossover MAC-system.
Hedging Best(SPY-SH), Best Combo3, Best(SPY-Cash) or SPY with the Best(Short) Large-Cap
Demonstrating the effect of hedging by using various percentages of the long portfolio value. The simulation is for the period Jan-2-2000 to April-1-2014.
iM-Best(Short) Large-Cap System
This model is intended to be used hedging long market exposure, not as a stand-alone model. It periodically holds a maximum of 5 short positions of large-cap stocks. The model was backtested from Jan-2-2000 to May-4-2014 on the Portfolio123 simulation platform as a stand-alone-model and would have provided an annualized average return of 26.5% with a max drawdown of -22.7% over this period.
iM-Best(XIU-Cash) Market Timing System for Canada
This model uses the signals from the iM-Best(SPY-SH) Market Timing System, substituting the Canadian ETF XIU for SPY and switches between XIU and Cash instead of SH. XIU tracks the S&P/TSX 60 Index and currency is Canadian Dollar.
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Is the TIAA Real Estate Account about to Roll Over?
The TIAA Real Estate Account, despite showing good returns over the last four years, is a typical example of a fund with disappointing performance over the longer term. In order to maximize one’s returns one has to know when to enter and exit the fund. My analysis shows that TIAA Real Estate may peak in the second half of 2014 which would provide an early indication to reduce one’s exposure. A firm sell signal would arise when its 1-year rolling return moves below 0%.
Gold: A Coppock Buy Signal for March 2014
The modified Coppock indicator will produce a buy signal for Gold within a few weeks. This is the result of various projections using random numbers between -$20 and +$30 and -$30 and +$20 for the weekly change of the gold price, representing upward- and downward trends for the metal’s price, respectively.
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With reference to Section 202(a)(11)(D) of the Investment Advisers Act:
We are Engineers and not Investment Advisers,
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