Close – Friday, December 6, 2013
To help me… ( and possibly you )……I am going to start plotting my VTI position weekly.
Closing Price Friday December 6, 2013 $ 93.86 Positive 4.8% to cost
Trailing mental stop ( 5% ) off high $ 89.29 Negative 0.02% to cost
Cost per share $ 89.53 Cost
200 day moving average $ 85.35 Negative 4.7 % to cost
50 day moving average $ 91.12 Positive 1.8% to cost
20 day moving average $ 93.10 Positive 3.9% to cost
10 day moving average $ 93.58 Positive 4.5% to cost
Goal: To get stopped out ( 5% stop…. or month end violation ) when my realized profit is 3 x 10 year Treasury Interest Rate + 3%.
Ever hear the expression ” don’t attempt to catch a falling knife “. That is probably very good advice against buying a declining specific equity. What I am attempting to determine for myself is whether the same advice holds for indexes. If the best methodology on stock picking is ” pick great stocks at great prices “, the question I ask is, doesn’t the same logic apply to a basket of stocks. Could an ETF such as VTI which contains 3500 stocks be ( in summary ) be considered a great stock. If I dollar cost averaged into VTI weekly ( with the price declining ) am I attempting to catch a falling knife OR am I averaging down my cost per share ( based on the commonly held perception that almost no one can pick the markets absolute bottom ) .
So, following this logic , once stopped out, I would put my money into a pile of short term Treasury equivalents, and gradually drain my pile of Treasuries by buying back into the market on a weekly basis…. even though the market is declining. No more than 2% per week. This idea is diametrically opposed to the trend following ALL OUT until its safe to re-enter the water based on VTIs being positive to its 200 day moving average at month end. Could I blend the two methodologies by averaging down weekly , and then go ALL IN at the buy signal.
Am I tinkering too much with a proven VTI trend following methodology ? Or, would this blended method yield a lower overall cost basis for my VTI position ?
See what you did to me Sister Monica !….” Good. Better, Best,…Never let it rest ! Till your good is better And better is your Best ! ”
I am no longer reviewing comments. Just this week I received almost 10,000 comments and from a quick review I’d estimate that almost 99% are unrelated trash that I neither understand nor have the time to monitor and read. So, please forgive my bulk eliminating all pending comments. But, I’ll continue to write for myself and as a sounding board for you and any 401K-ers who have suddenly been thrown into Wall Street’s jungle with their IRAs and don’t know how to navigate their way to the highway that leads to the safety of the beach. Bottom line, I am confident my approach and posts will stand up to objective professional third party scrutiny. I’ll keep sampling comments to see if its ok to re-open this channel.
Richard Maurice Gore