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Beating the S & P 500

Discussion in 'Investing' started by ElectricSavant, May 25, 2019.

  1. ElectricSavant

    ElectricSavant Active Member

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    This portfolio could take up to 3 years to recover which is ok for now.

    [​IMG]

    BUT.....

    It took an astounding 24 years, or 27 years on an inflation-adjusted basis, for the S&P 500 to recover and surpass its previous highs after the 1929 stock market crash.
     
    #61 ElectricSavant, Jun 15, 2019
    Last edited: Jun 16, 2019
  2. ElectricSavant

    ElectricSavant Active Member

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    I have commented in red in the quote below: :)

     
  3. ElectricSavant

    ElectricSavant Active Member

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    TomB16 brings out the point of front runners (flashboys) in which I cannot comment on as I do not have the knowledge to.

    My thoughts about the use of the scanner that I use might bring me close to the knowledge that I need.

    Here is where I am at just now... If I compare the symbols within the universe of stocks that I trade to each other daily using Value, Performance, Momentum and Safety with adequate volume and market share and hold them as they race against each other which can vary from 1 day to a year or more perhaps I can capture "moments of momentum" .

    ES

    P.S. My next thread will be titled "Moments of Momentum", Beating the S&P 500.
     
    #63 ElectricSavant, Jun 15, 2019
    Last edited: Jun 15, 2019
  4. TomB16

    TomB16 Active Member

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    Your risk exposure is not beating the S&P index. You're not doing anything so risky as to be exposed to losing your nest egg.

    My concern is simply for your success.

    My *unwelcome* analysis of your allocation strategy is that it will do fine and probably make money if you don't churn too much.

    I wish to also comment on how much I respect the analytical nature of your approach.

    Again, I did not intend to cause any drama. Carry on. :)
     
  5. ElectricSavant

    ElectricSavant Active Member

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    I believe there are geniuses in this forum.

    can I please have some more *unwelcome* analysis? :)

    Es
     
    TomB16 likes this.
  6. ElectricSavant

    ElectricSavant Active Member

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    Switching to a portfolio of 100% stocks has got me scared....wish I were younger. Maybe the next portfolio will use 28% bonds as posted earlier. BUT REMEMBER THE SCANNER THAT I USE CAN GO INVERSE. It comes down to if I believe that comparing stocks and ETF's that are being ranked daily to each other will work in a bear market also. Can "moments of momentum" (MOM) be captured while the market is going down?

    Another fear is misrepresenting on the internet. I do not want any visitor to read this archive and treat it as investment advice. Treat this thread like a view into a short journey. If one person can learn and grow from this vision then I would feel good.

    Es
     
    #66 ElectricSavant, Jun 15, 2019
    Last edited: Jun 15, 2019
    TomB16 likes this.
  7. TomB16

    TomB16 Active Member

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    I totally get your age versus bond allocation position as you indicated at the top of the thread. You are a smart man.

    One thing about bond ETFs is they are exposed to sell-offs when you need them most, reducing the already low value.

    When ETF units are created or destroyed by the market maker, a commission is charged. The more churn in/out of an ETF, the more money is extracted from the ETF by the market maker. It's a tax for creating/destroying shares. Remember, ETFs are a synthetic concept. They don't necessarily (and almost certainly don't) hold the quantity of bonds cited in their portfolio. It should be illegal, but isn't, but they directly lie about that. If you dig deep enough into the fine print, you will discover they track the performance of those bonds with derivatives. To be fair, it wouldn't be reasonable for them to buy and sell bonds in wholesale quantities every day. I simply suggest you understand what you are buying and any risks which may be invisible.

    Anyway... back to the issue at hand.

    When the market crashes and you want to sell bonds to move into the deeply discounted markets, you will find the bond price will be at it's lowest. This, after making negligible interest during the hold period. You will also find the ETF will lose value during periods of high volume trading (market maker overhead, as cited above). The ETF will not track the units it claims to hold but doesn't.


    An alternative might be to pick up convertible bonds or debentures from a couple of decent, stable, companies. If you don't require liquidity, and it sounds like you don't, AAA corp bonds should yield right around 3.5% and you'll have the option to convert them if the options should become more valuable than the coupons at some point in the future. In other words, 3.5% is the least you will make if the company doesn't go bankrupt. No invisible market overhead other than buy/sell, either.

    I don't know if corp bonds fit into your strategy but I offer it as an idea that you may find to be of value.
     
  8. ElectricSavant

    ElectricSavant Active Member

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    Buy and Hold Vs. Individual Stock Picks Vs. S & P 500 is a difficult thing to chart. What are the individual stock picks?

    I need to find another vehicle to park cash in. TomB16 brings out some interesting Bond ideas.

    Es
     
  9. ElectricSavant

    ElectricSavant Active Member

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  10. TomB16

    TomB16 Active Member

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    I wanted to rant more about ETFs and tracking error. I have examined this very closely over the course of three years and have come to the conclusion that ETFs have invisible overhead that causes them to not produce the results they claim. They may show they have paid a certain percentage but if you take the money you invested, divided by the value at the end of the year, you will find the claimed result is not quite achieved.

    For this reason, quite a few people claim decent results by simulating an index with direct share purchases. It's not hard to cover most of the strategy of an index without purchasing every stock. Several people have documented efforts to pace an index by holding less than 50 stocks. I've never done this but respect the reported results.

    REITs.... that is another discussion.

    If you understand real estate... I mean... really understand it... REITs can be an extremely powerful tool.

    With REITs, I look for many specific things but I will touch on some of them:

    - yield that is less than the long term average EPS (for sustainability of the dividend)
    - yield that is more than 60% of the EPS (it's a red flag if too much money is being diverted from the owners)
    - EPS that is generally growing

    Occasionally, a REIT will expand with a large chunk of new property. When that happens, it decimates the books. Things can look terrible for 18~24 months. That's when I buy.

    You need to have followed the REIT long enough to know the bad numbers are not systemic and just the result of a property purchase. When this is the case, the worse it is, the more you buy. I've bought REITs with EPS of -0.15 and trailing yields of 0.80.


    I think about REITs quite a bit differently than growth stocks. They seem to involve a different philosophical calculus.

    I look at REITS in terms of how much money per $1000/mo of income. Right now, I favor REITs that cost $160,000 ~ $185,000 per $1000/mo of income. So, for $360K of cash, $2000/mo of income can be generated.

    Most REITS have share purchase plans and DRIPs. These are great. I plan to leave my REITs on DRIP even after I start withdrawing cash. Here's why:

    If a REIT offers 4% discount on DRIP, you should leave it to DRIP until you are dead.

    If you are receiving a $2000 dividend each month which you need to live, you would be better off to take $2080 of stock and then sell it with $10 commission. You are $70 ahead or 3.5% ahead. That is considerable.

    If you don't need the income to live, you will find that a DRIPping REIT compounds with every dividend. A REIT that pays monthly will compound 12 times per year.

    The yield is displayed as though it is simple interest but it does not have to be. It may pay $0.84 per year but if it's paying $0.07 per month and you are buying more shares every month, those shares will already pay a dividend the next month. In otherwords, it is compounding monthly. An 8% REIT will pay right around 9% if it is compounding monthly and has a discounted DRIP. That's a nice return, IMO.

    This isn't a complete discussion but I need to go join my wife for dinner and a movie. Good luck, ES. I look forward to watching you succeed.
     
    ElectricSavant likes this.
  11. ElectricSavant

    ElectricSavant Active Member

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    Well I got a lot to think about and I have some ideas for the new portfolio. I do not know when this portfolio will end...but as mentioned as soon as it no longer beats the S&P I will exit and get a reset with 28%-40% of cash to hold which will use recommendations from a subscription service that I follow (Monthly Paying Retirement and a Conservative approach with ETF's). I will take the other 60%-72% and goose the cash with moments of momentum (Best Stocks Now APP)

    Stay Tuned..(these proposed changes, I must think about)

    ES

    P.S. I really like this current portfolio as I resist change. I am hoping we can continue in this thread and that this portfolio can accel past the S&P performance and make it worthwhile.
     
    #71 ElectricSavant, Jun 15, 2019
    Last edited: Jun 15, 2019
  12. ElectricSavant

    ElectricSavant Active Member

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    I must make it out of the gate and always be beating the S & P or I will constantly get a reset. Perhaps, I am setting myself up for disappointment and constant resets will cumulatively result in loss of capital and a negative ROI.

    A lot to think about...recognizing that I am competing with the S&P and not ROI is comforting. I am wary of decreasing my cash side of the portfolio for the reasons that TomB16 states. I am 60 years old and to over-speculate in this quest could not be productive.

    ES
    It took an astounding 24 years, or 27 years on an inflation-adjusted basis, for the S&P 500 to recover and surpass its previous highs after the 1929 stock market crash. If I were a "Buy & Hold Investor" I would be dead with losses by then if this repeated itself.
     
    #72 ElectricSavant, Jun 15, 2019
    Last edited: Jun 15, 2019
  13. ElectricSavant

    ElectricSavant Active Member

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    For those of you that are young enough....please read this thread and tell your friends...If you have time this might be a great thread for your training.

    Ratios of Cash Vs. Individual Stock Picks in one portfolio buffer results in that portfolio. Find the right balance for your TradeVesting time horizon.

    Es

    P.S. all bets are off if EBOLA wipes out the population of the USA. Disease control for people immigrating from the Congo to the USA is necessary. Tuberculosis and Measles are worries too from other countries...there are open borders to Heaven (or Hell) if you are ready to die.
     
    #73 ElectricSavant, Jun 15, 2019
    Last edited: Jun 15, 2019
  14. ElectricSavant

    ElectricSavant Active Member

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    Something to think about...

    TradeVesting with MOM (moments of momentum) in a separate thread is an option. That thread would be for young speculators that will be position trading individual stocks only. Unfortunately the M1 Finance brokerage platform really is not appropriate for a speculative style of position trading. At least my results would be conservative compared to a real trader trading in a real trading platform. There would be no over-reporting of profits that way and it would be a cake-walk for followers to outperform the thread.

    I simply would keep it real by trading a segregated pie devoted to 100% individual stock picks from the Best Stocks Now APP (held from A+ to Hold).

    Of course my Bond, REIT's and Monthly paying holdings would be in another PIE that could be in another thread. This might be a better way to show performance to different age groups rather than combining everything in one pie and thread. Different age groups could simply evaluate what combination is best for them, All, None or Mix.

    of course this thread continues until it underperforms the S&P....

    ES
     
    #74 ElectricSavant, Jun 16, 2019
    Last edited: Jun 16, 2019
  15. ElectricSavant

    ElectricSavant Active Member

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    Gold continues to gain (above the 1350 level). This Iran incident and the trade war seem to be the concern currently. We seem to be teetering on the brink of collapse during a bull market with no apparent roadblocks. It's amazing how extreme both sides are....which side are you folks?

    ES
     
  16. ElectricSavant

    ElectricSavant Active Member

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    Healthy temperature in the market according to the Best Stocks now APP. http://gundersoncapital.com/wp-content/uploads/2019/06/BestStocksNow-190617.mp3

    (ILMN) will be added to the portfolio this AM at 7:00CT (this will bring the total holdings to 16 in the Best Stocks now slice). No Sells. Rebalance. https://m1.finance/3hMgdO5gW

    This portfolio is outperforming the S&P 500 by 1.46% from it's inception 27 days ago (05/22/2019). https://docs.google.com/spreadsheet...3kKtbJK7tCeI6WMm1QdqVNKoc/edit#gid=1411141770

    views 1538
     
    #76 ElectricSavant, Jun 18, 2019
    Last edited: Jun 18, 2019
  17. ElectricSavant

    ElectricSavant Active Member

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    The S & P up nearly 1%

    • European Central Bank (ECB) President Mario Draghi tried to reassure market players about the bank’s ability to act amid growing doubts on the real effect of monetary policy if a new recession were to materialize.
    • President Trump states he to have an extended meeting with China's President XI at the G-20.
    http://gundersoncapital.com/wp-content/uploads/2019/06/BestStocksNow-190618.mp3


    No new Trades. https://m1.finance/1M5GY8iDa


    This portfolio is outperforming the S&P 500 by 0.82% from it's inception 28 days ago (05/22/2019). https://docs.google.com/spreadsheet...P3kKtbJK7tCeI6WMm1QdqVNKoc/edit#gid=361500680


    views 1581
     
    #77 ElectricSavant, Jun 18, 2019
    Last edited: Jun 19, 2019
  18. ElectricSavant

    ElectricSavant Active Member

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    This is why I do not hold ADR's in this ROTH portfolio.

    https://www.dividend.com/how-to-invest/how-does-taxation-of-adr-stocks-affect-investors/

    ADRs should also be held in taxable accounts in both the U.S. and Canada, instead of in qualified or registered plans like an IRA or RRSP. Typically, tax-deferred accounts are great strategies for investors who do not have to worry about the tax implications of dividends. However, ADRs still require withholding, regardless of the type of account it is held in. So, it is important to note that when an ADR is held in a qualified or registered account, the account owner can no longer claim the foreign tax credit and the ability to claim will be lost.
     
    #78 ElectricSavant, Jun 19, 2019
    Last edited: Jun 19, 2019
  19. ElectricSavant

    ElectricSavant Active Member

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    #79 ElectricSavant, Jun 19, 2019
    Last edited: Jun 19, 2019
  20. ElectricSavant

    ElectricSavant Active Member

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    The Fed left rates unchanged.

    S & P visited a new high today and bumping into resistance.

    No new trades. The portfolio continues to beat the S&P 500 after 30 days with 40% of its capital in Bonds.

    This portfolio is outperforming the S&P 500 by 0.59% from it's inception 30 days ago (05/22/2019).

    views 1696
     
    #80 ElectricSavant, Jun 20, 2019
    Last edited: Jun 21, 2019

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