This is Why I prefer Index Funds :)

M

member275544

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a. Every 5% drop in the market from all time high 7125( at present ) – 10% of this pot should be added in.
b. This pot will be used up only when the market has fallen 50% - but it has then allowed you to keep buying as the market drops in an organised way
c. Every time a new high is made this pot is recalculated into 10 parts and the 5% rule restarts

In 2008, when the high was 6750 a 10% drop would have taken you to almost 6000 and at that point the MAs have crossed so you have entered 20% of your pot.
price drops another 10% so by now you have entered 40% of your pot and this is your market crash scenario
so in just one market crash, you have managed to lose 40% of your pot
the same happened in 2011, so in 3 years you have lost almost everything.

I might have misunderstood, proabably I have, but this scenario is more than a possibility then?

Also I notice that you buy when it goes down, which is counter intuitive as you want to be buying when its on the way up, so have you thought about increasing your pot for 5/10% rises in the index?
 
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gonnamakeit

Member
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Thanks for your response – yes I think there is a mixup along the way – let me explain what would happen in 2008 in detail.

Firstly I am using IG MT4 feed for crossovers.
FXPro closes from 10pm to 8am so movement within these hours is not recorded – hence this is not accurate – IG is 24hr feed so that what I use and that’s the image below for this period.

Also @malaguti – part 2 of the strategy involves having a small pot (30% of the monthly drip feed) to put into the market at every 5% dip

Peak was in Oct 2007 @ 6750 – this was the high so everything is judged by this.

This strategy is in place to replace Buy and Hold – I don’t think that’s a viable strategy so this is to try and pull funds out on the way down and buy back lower.

Also to try and strategically place funds as the market goes down.

The crux of this is that as it’s the main UK index over time the value must go up also as dividends are pumped in every year – year on year this must grow.
The dividends are very important so that you need to spend as much time in the market to gain benefit from this.

So peak in Oct 2007 @ 6750

MA crossed on 22/1/08 @ 5513

10% lower than MA cross is 18/9/08 @ 4900

So between the peak @ 6750 and the MA + 10 % cross the following would be happening.

Strategy 1 for drip feed would be continuing as per normal every month

Strategy 2 for the 5% rule would have kicked in at the following levels

@ 6412 5% down
@ 6075 10% down
@5737 15% down
@5400 20% down
@5062 25% down
@4725 30% down
@4387 35% down
@4050 40% down
@3712 45% down

So you can see above that we were getting units at much better prices – so when the index goes up the returns would be considerable.

Then on 18/9/2008 strategy 3 kicks in as we hit 10% below the MA @ 4900 – then the complete pot is pulled out – strategy 1 and 2 continue as per normal.

The full amount which is pulled out is divided into 5 parts as explained and placed back in at the following levels

Part 1 @ 4410 10% down
Part 2 @ 3920 20% down
MA cross @ 5000 so rest of pot back in.


So as you can see it’s a systematic way of investing long term as buy and hold just will now provide a large % return long term

This system should be able to provide that.

Again im hoping you can stay with the detail above – I would really appreciate thoughts and feedback to let me know if you are convinced that this would work and if not why.

Hoping you enjoyed the share and thanks
 

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M

member275544

0 0
Thanks for your response – yes I think there is a mixup along the way – let me explain what would happen in 2008 in detail.

Firstly I am using IG MT4 feed for crossovers.
FXPro closes from 10pm to 8am so movement within these hours is not recorded – hence this is not accurate – IG is 24hr feed so that what I use and that’s the image below for this period.

Also @malaguti – part 2 of the strategy involves having a small pot (30% of the monthly drip feed) to put into the market at every 5% dip

Peak was in Oct 2007 @ 6750 – this was the high so everything is judged by this.

This strategy is in place to replace Buy and Hold – I don’t think that’s a viable strategy so this is to try and pull funds out on the way down and buy back lower.

Also to try and strategically place funds as the market goes down.

The crux of this is that as it’s the main UK index over time the value must go up also as dividends are pumped in every year – year on year this must grow.
The dividends are very important so that you need to spend as much time in the market to gain benefit from this.

So peak in Oct 2007 @ 6750

MA crossed on 22/1/08 @ 5513

10% lower than MA cross is 18/9/08 @ 4900

So between the peak @ 6750 and the MA + 10 % cross the following would be happening.

Strategy 1 for drip feed would be continuing as per normal every month

Strategy 2 for the 5% rule would have kicked in at the following levels

@ 6412 5% down
@ 6075 10% down
@5737 15% down
@5400 20% down
@5062 25% down
@4725 30% down
@4387 35% down
@4050 40% down
@3712 45% down

So you can see above that we were getting units at much better prices – so when the index goes up the returns would be considerable.

Then on 18/9/2008 strategy 3 kicks in as we hit 10% below the MA @ 4900 – then the complete pot is pulled out – strategy 1 and 2 continue as per normal.

The full amount which is pulled out is divided into 5 parts as explained and placed back in at the following levels

Part 1 @ 4410 10% down
Part 2 @ 3920 20% down
MA cross @ 5000 so rest of pot back in.


So as you can see it’s a systematic way of investing long term as buy and hold just will now provide a large % return long term

This system should be able to provide that.

Again im hoping you can stay with the detail above – I would really appreciate thoughts and feedback to let me know if you are convinced that this would work and if not why.

Hoping you enjoyed the share and thanks

I thought I had it, clearly I didn't..its not the price feed that will be negligible
you mentioned that 1 and 2 and then strategy 3 yet I thought you had just two pots of money..70% and 30%.
I'm not trying to catch you out, just trying to understand
lets assume you start with 10k

so strategy 1 70%, regular drip feed each month..
so 7000 in total over how long? £500/month?
when do you exit strategy 1? when will you reenter once you've exited (again at same time each month?

strategy 2, remaining 30% so £3000 is added 10%at every drop of 5% in the market
when do you exit strategy 2...market crash scenario? and then after exit, reentry at cross of MAs +10%?

you mentioned now strategy 3..whats that one?

the crux is going to be your 70% pot..can't quite get what you're going to do with this
 

gonnamakeit

Member
68 0
Thanks for the reply...i think ive overcomplicated this as it really is quite simple ( in my head anyway )

let me try and simplify it.....

This is a simple plan to build up a savings pot over many years using a a tracker due to the low fees.
The tracker investment is a passive investment but i have made few steps to turn it into an active strategy - so that returns can be ++++ and also we are out of the market during crashes with a view to getting back in the market lower.

Lets assume we have £1000 per month for this savings plan.

Strategy is divided into three parts ( exact details are listed above )

Part 1 - this is simple drip-feed monthly - same mount every month. Benefits of this pound cost averaging have been proved. But in this 70% of the monthly money ( in our case £700 is used )

Part 2 - the remaining money 30% per month ( 300 in our case ) is kept in a cash account until the market falls - so 300 is added to this acc every month. This money is injected at 5% drops in the market to always get a better price ( full details above )

Part 3 - this wont happen often at all but during a market crash this allows us to pull all our money out from the tracker and reinject it at further 10% drops in the market. If we stayed in our acc could drop by 50% in a severe correction - so this example may pull us out at 20% down and then renter as the market continues to drop.

As this is a long term view after any down turns we do have upturns and then we have now bought into the market at mush lower levels so our % back will be ++++ compared to any buy and hold strategy.

I also trade more riskier ways but this meant to the main investment tool for retirement. I have read a lot on trackers etc etc and on buy and hold.
I really dont think with top heavy markets buy and hold can work well - we need a way to strategically run inside a tracker which is what i have put together above.

I feel it has the possibility of changing lives - showing people how to outperform the market consistently - and the reason why i have posted here is to try and find flaws in this so i can go back and tweak it until i have something which works well.
 
M

member275544

0 0
Thanks for the reply...i think ive overcomplicated this as it really is quite simple ( in my head anyway )

let me try and simplify it.....

This is a simple plan to build up a savings pot over many years using a a tracker due to the low fees.
The tracker investment is a passive investment but i have made few steps to turn it into an active strategy - so that returns can be ++++ and also we are out of the market during crashes with a view to getting back in the market lower.

Lets assume we have £1000 per month for this savings plan.

Strategy is divided into three parts ( exact details are listed above )

Part 1 - this is simple drip-feed monthly - same mount every month. Benefits of this pound cost averaging have been proved. But in this 70% of the monthly money ( in our case £700 is used )

Part 2 - the remaining money 30% per month ( 300 in our case ) is kept in a cash account until the market falls - so 300 is added to this acc every month. This money is injected at 5% drops in the market to always get a better price ( full details above )

Part 3 - this wont happen often at all but during a market crash this allows us to pull all our money out from the tracker and reinject it at further 10% drops in the market. If we stayed in our acc could drop by 50% in a severe correction - so this example may pull us out at 20% down and then renter as the market continues to drop.

As this is a long term view after any down turns we do have upturns and then we have now bought into the market at mush lower levels so our % back will be ++++ compared to any buy and hold strategy.

I also trade more riskier ways but this meant to the main investment tool for retirement. I have read a lot on trackers etc etc and on buy and hold.
I really dont think with top heavy markets buy and hold can work well - we need a way to strategically run inside a tracker which is what i have put together above.

I feel it has the possibility of changing lives - showing people how to outperform the market consistently - and the reason why i have posted here is to try and find flaws in this so i can go back and tweak it until i have something which works well.

Other than a market crash, when will you exit? Are you planning to "hold" this until year x when you retire or something.
and I mentioned earlier on two occasions where your scenario 3 has occured. In a short space of 3 years your market crash scenario has happened resulting in heavy losses
I get that there are potential gains, but these gains may never actually be realised unless you have a way of exiting the market other than a stop loss.
 

gonnamakeit

Member
68 0
as this is a long term plan yes i was planning to hold for many years - with this strategy i didnt think i would need to exit at all except near retirment

as investors we know that if we are in this for the long run then we may go through such crashes - but in the end markets do rise and as you have bought lower when market gets back rallies you will be a lot better off - rather then selling up in bad times.

do you think a full exit plan is needed - see if this was a pension etc it would be held till you would need to crystallise - maybe plan for this 5 years before you need to retire.

you say 40 % loss - but this was followed later by gains which far outweighed these...

again would like to make this a long term plan so any tweaks changes you feel would be greatly appreciated....

thanks
 
M

member275544

0 0
as this is a long term plan yes i was planning to hold for many years - with this strategy i didnt think i would need to exit at all except near retirment

as investors we know that if we are in this for the long run then we may go through such crashes - but in the end markets do rise and as you have bought lower when market gets back rallies you will be a lot better off - rather then selling up in bad times.

do you think a full exit plan is needed - see if this was a pension etc it would be held till you would need to crystallise - maybe plan for this 5 years before you need to retire.

you say 40 % loss - but this was followed later by gains which far outweighed these...

again would like to make this a long term plan so any tweaks changes you feel would be greatly appreciated....

thanks

OK I've got it, thanks for putting up with me. I'll come back to you with a what if scenario to demonstrate the point and perhaps a simple adjustment.
 

gonnamakeit

Member
68 0
cool...awaiting your post

i will also aim to post some data on this evening about how this would have made a lot more then buy and hold
 

Pat494

Legendary member
14,621 1,579
I know in Forex the brokers make an over night charge. So this forces investors/traders to only do short term.

How is it for longer term futures traders ? Any long term charges etc. ?
 

gonnamakeit

Member
68 0
@Pat494

the above is all within ISAs so only fee is the one charged by the fund and broker...

Its the lowest on the tracker about 0.5% or less per year
 
M

member275544

0 0
cool...awaiting your post

i will also aim to post some data on this evening about how this would have made a lot more then buy and hold

I've started to take a look and noticed one thing immediately. You obviously want prices to rise and so in your 70% drip feed your average price therefore increases.
This means that when you exit, you exit with a heavy loss as your average price is high
you are buying back at more than half the amount you are entering, so you are taking advantage of lower prices at half the amount you are incurring any potential losses
changing this immediately would have a more postive impact, as in your drip feed should be 30% and your buy back at 70%
thats the first thing I've found, but I'll give you a complete example to demonstrate it and then we can start thinking about protecting your capital or else i do feel you will have very little return in the end depsite your intentions of getting lower prices

I'll come back with more...
have emailed you now the results, we'll look at how we can improve it and give you a simple view of my strategy and see if that wouldn't be better
 
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