Actively trading mutual funds

[Sandy & Shirley]

As we get into retirement we have to be a lot more conservative about our investment strategies. I did a lot with futures and short term covered calls while I had a good paying job to fall back on. Now I have to live off of Pensions, Annuities, Social Security, and other fixed income sources that may or may not cover all of my living expenses, definitely not all of my desired life style!

I no longer have the ability to live off of my job’s income stream and use a market downturn as a buying opportunity! During retirement, if I want to maintain my desired life style, if the downturn lasts longer than my cash reserve, I have to sell low to get the extra cash! I still can’t buy low during short term downturns like BRexit, but that does not stop me from starting a Roth Conversion Horse Race!

All that said, I have to be more conservative in my investing. I can no longer say things like, the government of the United States knows how great Solyndra is, let me put a large chunk of my savings there! My investment strategies have changed to looking at ETFs and no transaction fee Funds. I still do not want to buy and hold for years at a time, I want to look for trends, winners and losers, and hold things for a few months or so.

I have some strategies that I have been following for the past 2 years and I have been beating the market, not by huge amounts, but acceptable conservative gains.

Are there others here who have similar goals and strategies? Would love to hear how you are managing your savings during retirement.

 

[braumeister]

I have to be more conservative in my investing.

...

I still do not want to buy and hold for years at a time, I want to look for trends, winners and losers, and hold things for a few months or so.

I think the majority here would say those are contradictory approaches. Are you sure about both of them?

 

[Sandy & Shirley]

Not really, investing in individual stocks is far more volatile than investing in funds. A single stock symbol can change dramatically, up or down, in a few days, even overnight. The fund is like spreading that risk out over multiple symbols so a big change in one symbol does not move the fund that much. So, fund investing is definitely more conservative.

Most of those who invest in mutual funds look primarily at the 1, 3, and 5 year returns, and very little is even published about their short term gains. To a large degree, mutual funds are what your IRAs and 401Ks are invested in where buy and hold is like the primary emphasis.

My log on name says it all, PapaGeek, I’ve been a software engineer since 1967! I wanted the higher security of the conservative investment in funds, but wanted to look at them, not on a daily trading schedule like my short term covered call days, but on a monthly or quarterly schedule, again, not the long term years schedule of the 401K managers.

I actually wrote my own programs to take historical snapshots of the fund prices and examine various Rates of Return over individual and composite time frames and time periods.

 

[COcheesehead]

Funds love short term trading, so much that many of them have short term trading fees they tack on if you are in the fund too short of time frame.

What you are describing in your trading strategy is beta. Why don't you just look for low beta ETF's or stocks and trade them?

 

[Sandy & Shirley]

Funds love short term trading, so much that many of them have short term trading fees they tack on if you are in the fund too short of time frame.

What you are describing in your trading strategy is beta. Why don't you just look for low beta ETF's or stocks and trade them?

Very true, but the basis of my Symbol list is the list of NTF, no transaction fee, funds that Fidelity offers. My list also includes a fair number of ETFs plus a few extra symbols like DNP.

My list is currently 355 symbols long and about two thirds return less than the average market indexes over almost all of the time periods that I track.

When I view my list based on a give sector, like Industrials, the ETFs are usually equally spread out over the list and are rarely at the top of the list. I’m currently invested in 20 symbols, 6 of which are currently ETFs.

 

[samclem]

Good luck with your quest. You've now got a stash of money that must last for the rest of your life, this is a poor life stage in which to pay the tuition for the education that most active traders get.

Yes, you are seeking higher gains with low risk. A money manager who can do that reliably (using individual stocks, ETFs, mutual funds, futures, derivatives, foreign currencies, or anything else) can earn millions of dollars per year. Few can do it, even with tons of data, analysts doing digging into corporate financials, sophisticated hyper-multivariate computer screening mechanisms that undoubtedly make your automated screener work look quite tame. But you believe you can do it as a retiree. Maybe you'll succeed. Like I said--good luck. But IMO you'd be far better off by picking a conservative asset allocation, using low-cost index funds to meet it and just mechanically rebalancing periodically (selling high, buying low) to keep it all in line as prices change. It's a well proven approach, and you need an approach that is well proven at this stage. Just my opinion.

 

[LOL!]

I'm doing pretty well following the advice in LOL!'s Market Timing Newsletter. Is that the kind of thing you are looking for?

 

[DrRoy]

My equity $'s are in index ETF's. No trading, no trying to beat the market.

 

[Islandtraveler]

I have two equity accounts which I funded equally. One with Vanguard and one with Scottrade. My Vanguard account is totally passive with 60% Total Market and 40% International. In my Scottrade account, I subscribe to a fund following Newsletter which recommends no load mutual funds and ETFs. It gives monthly buy and sell recommendations based mostly on past performance. Basically, what appears to be a momentum strategy. I hold 20 positions at any given time. My rational mind tells me to put all of my funds into the Vanguard account and be done with it, but I have a need to tinker. That being said, my trend following strategy has outperformed Vanguard every year for 5 years to the tune of about 200 bps annually. Granted this is before taxes so the net amount is less. It seems to have a higher beta than Vanguard as the up and down periods are more extreme, but the results are impressive. I have only been comparing the monthly results for two years but the Scottrade account is 20% higher over a five year period. The newsletter is Fundx and they have been in business for 40 years. Hulbert gave them a top rating for long term performance. Although I am an index believer, I also believe there are other things that work.

 

[braumeister]

Although I am an index believer, I also believe there are other things that work.

Terribly sorry, but you are hereby eternally banned from ever logging into the Bogleheads website. Have a nice day.

 

[Ian S]

Very true, but the basis of my Symbol list is the list of NTF, no transaction fee, funds that Fidelity offers. My list also includes a fair number of ETFs plus a few extra symbols like DNP.

My list is currently 355 symbols long and about two thirds return less than the average market indexes over almost all of the time periods that I track.

When I view my list based on a give sector, like Industrials, the ETFs are usually equally spread out over the list and are rarely at the top of the list. I’m currently invested in 20 symbols, 6 of which are currently ETFs.

Even though a fund may be NTF, it will still often have a significant fee imposed for frequent trading (typically considered less than 60-90 days holding time.)

 

[Sandy & Shirley]

Good luck with your quest. You've now got a stash of money that must last for the rest of your life, this is a poor life stage in which to pay the tuition for the education that most active traders get.

Yes, you are seeking higher gains with low risk. A money manager who can do that reliably (using individual stocks, ETFs, mutual funds, futures, derivatives, foreign currencies, or anything else) can earn millions of dollars per year. Few can do it, even with tons of data, analysts doing digging into corporate financials, sophisticated hyper-multivariate computer screening mechanisms that undoubtedly make your automated screener work look quite tame. But you believe you can do it as a retiree. Maybe you'll succeed. Like I said--good luck. But IMO you'd be far better off by picking a conservative asset allocation, using low-cost index funds to meet it and just mechanically rebalancing periodically (selling high, buying low) to keep it all in line as prices change. It's a well proven approach, and you need an approach that is well proven at this stage. Just my opinion.

I have had dealings with multiple money managers during my 70 years. I can not remember a single one who managed my money to a point where my returns were higher than the market averages for any extended period of time.

When I worked for a hedge fund I was forced to let others manager my money. I chose 3 different companies to manage my holdings hands off and not one of them beat the market. I had two other managers before started with the hedge fund, again none of them beat the market. My sister left her money with a large company who ended up losing almost a third of their retirement savings. The best thing I can say about any of the companies I have had dealings with is that the person managing my parents holdings in my name did call me shortly after their death to let me know that my now ex called them and told them to sell everything and send her half the cash. He let me freeze the account so the inheritance could happen first.

I’m not killing the market by any stretch, but I am beating it by an average of a fractional percent each month.

 

[nun]

I feel that the OP is grabbing for a prize that is constantly receding and might be best served by adjusting their retirement lifestyle expectations and taking more of a total return approach to income generation.

 

[ERD50]

... During retirement, if I want to maintain my desired life style, if the downturn lasts longer than my cash reserve, I have to sell low to get the extra cash! I still can’t buy low during short term downturns like BRexit, ...

But with a typical AA, your non-equity portion should provide you with income for many, many years before you would need to sell low in a downturn.

Even a fairly aggressive 80/20 AA, and a fairly un-conservative 4% WR, and assuming a conservative 2% dividends - you only need 2% on average from principal, so about 10 years from that fixed side.

And you could do some shifting of the AA if you see buying opportunities. Unless you are 100% equities, which I won't argue against, but doesn't really fit your self-described 'conservative' goals.

-ERD50

 

[hlfo718]

My opinion, you should sit down and figure out your cash inflows each month from various sources and calculate what are the necessity expenses and if there are some excess then "play" with that little amount.

You say you worked for a hedge fund, did they beat the benchmark? If so how much work was involved and did it last?

You say you beat the market a little each month, are you sure about that? Are you benchmarking yourself correctly? If you are flipping small caps, is your benchmark S&P 600 or 500? Is it value or growth, US vs Int'l.

More importantly if this is your way to generate enough money to retire, what happens when you get older and can't or don't want to flip stocks any more?

 

[Sandy & Shirley]

Maybe I didn’t say it properly when I said I beat it by an average of a fractional percent each month. I don’t beat the average each month, but over a 12 month period I am generally one or two percent higher that the average of the DOW, S&P, Russell, and NASDAQ. That is like beating the indexes by less that two twelfth of a percent on an average month. Sometimes I lose, sometimes I win, and the overall average is higher. My brokers never did that!

As to the hedge fund, I was on their database side, not the investing side. I obtained real time ticker data from exchanges around the world and kept our central computer up to date, real time, with the symbols we were following at each exchange.

As with my own results, the hedge fund lost some months and won other months. I can say that my 401K investments in their funds did beat the market consistently, not every month, but for every 6 to 12 month period.

As for our retirement, we are set up fine. We each have small pensions, Social Security, and fixed lifetime annuities that completely cover our normal spending. Our TIRA and Roth accounts are for having fun, traveling, etc.

As for BRexit, we had very little extra cash available to take advantage of the downturn by buying low, but we did run a pair of Roth Conversion Horse Races. Double our target conversion limit when the market crashed on Friday and our limit again on Monday’s downturn. In total we converted three times what we could handle within the 46.25% marginal rate and/or the $85,000 MAGI Part B limit. Then, in December, we checked the ROR on each conversion, kept the best and recharacterized the rest. Our final conversion returns were around 30%. We did this in December so that the 1099-R forms sent to the IPS from our broker would be complete and accurate for the year, no need for revisions after the forms were filed.

When I can’t do this anymore I will just put the money in a variety of funds like others on this site recommend. My OGDP, as Citi calls her on my pension paperwork, Opposite Gender Domestic Partner, have to be politically correct, anyway, she has all the paperwork to do the necessary conversions of our investments if something happens to me.