I'd be interested to know where you invest your suplus savings such that you get >11% long-term with similar levels of risk - perhaps you could enlighten us? In any case, you can juice the returns by using leverage - tolerating 20% drawdowns brings your return up to the mid/high teens.
I didn't put in short-ETFs. The idea was to benefit from the inherent investment returns from being long investment asset classes, whilst trying to avoid periods of serious negative price momentum. Short ETFs will have a negative long-run return so it doesn't really fit in to that approach IMO. I haven't tested it though.
Looks like a very solid long term investment system, good work. I may have misunderstood, but if you are testing ETFs, how did you backtest 50 years if SPY (which I am most likely incorrectly assuming you are using) came out in '93?
Here are the numbers for the last 3 years, with real money: Year S&P System Leveraged 06 +15.2% +14.5% +25.4% 07 +5% +7.7% +12.5% 08 -40.4% +2.7% +4.9% Return -27.7% +26.6% +48% per yr* -9.25% +8.15% +14% * compound % return per annum I do not understand the above table? Can poster explain it again? 06 --- This is 1006 +15.2% --- what is this for? +14.5% --- what is this for? +25.4% --- what is this for? Thanks.
Sounds oddly familiar to http://papers.ssrn.com/sol3/papers.cfm?abstract_id=962461 Exact same 11% annualized return, 9.5% max DD, exact same asset classes, probably same/similar long/cash logic.
I've studied the returns of approx 300 CTA's and approx 600 long/short equity hedge funds (selected for having sufficient assets under management and length of track record). The typical return to drawdown ratio is about 0.40. On a dollar weighted basis it is slightly higher at 0.43 or so. Return to volatility averaged 0.61 and dollar weighted 0.63. These numbers likely overstate results due to survivorship bias (failing funds tend to stop reporting their performance). I can't think of only a few firms that have delivered better than 1:1 (using drawdown or volatility) over a long period of time. Most of these are closed to new investment.
The SPY is just the S&P 500, they are pretty much identical, so I just used the index value and added on transaction costs.
Cutten, very nice results. Approximately when did the system decide to go to cash? When the system decides to go to cash, does it do so in all asset classes (stocks, bonds, REITs, commodities) at the same time... or is it possible for some asset classes to remain invested while others are in cash?