SPY Indexing vs Allocation

December 2, 2014

I’ve indicated in previous posts  that ” SPY ”  ( S& P 500 ETF ) is the benchmark against which market professionals., and  gurus  are measured for performance.

Thus far in 2014 ( eleven months )  SPY has appreciated 12.4%.  That is  5.3 times  the 10 year Treasury yield  ( 2.34 % ).

Would you be good with that,  ( 12.4% )  for the entire year ?  Or, would you want more ?  Remember, John Bogle and Warren Buffett  strongly suggest you don’t go any further.  Just “Buy and Hold” for the long run and your returns should set the pace for some very high priced money managers who,  at this very moment , are scrambling from behind in an all out attempt to catch SPY before 2014 draws to a close.

If your answer is  , ” I want more  than 12.4% ” , you may wish to consider each of the following  choices.

# 1 )  Time your  SPY investment by selling SPY when it ends a month below its 200 day moving average and by purchasing SPY when it ends a month above its 200  day moving average.    What could be more simple ! There have been only six round trip  SPY trades  using this methodology since January 4, 2000.  Five of the six  round trips were winners and the only losing trade was for negative 5%.  You would have gained 293.7%  since January 2000 …. a 14 year  average gain of 20.97% per annum versus Buy / Hold,  which would have rewarded you with an average of  7% appreciation per annum. . .   Obviously no guarantee of either of these results going forward…..Or,

# 2 )  ) You can choose to  play both sides of the street and  hedge your bets by trade  timing  half your investment in SPY  and  sitting  with the other  50 percent  through thick and thin as Bogle and Buffett  suggest you do with your entire portfolio.  Or,

#3 )  Maybe you believe you have the time  ,emotions  and  skill to handle more risk . And now, remember,  you are getting into allocation risk  when you begin to slice and dice the S&P 500 and add alternate investments.

With November now in the books,  SPY has appreciated 2.91 % while my combined allocated portfolio appreciated only  1.34% ( My allocated portfolio included SPY,  writing SPY Puts,  Sector  ETFs,  Cash Flow driven equities,  Smart ETFs ( including those which included those based on share Buybacks,  Moats,  Dividends and Momentum  )  The only deployment allocation which beat SPY was my cash flow driven equity selections at 3.85%.  Everything else became a drag on this allocations performance.

I have a great deal of  ground to make up after just one month with five months till May 2015..

SPY and VTI have ended November2014 above their respective 200 day moving averages,  so the ” BUY ” signal for SPY triggered December 30, 2011  continues in effect ,  with the finish line of  three complete years of no trades now in sight.

 

Richard Maurice Gore

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