GGT Signaled LONG on F-Fund/AGG

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With the close of Friday's market, we have a long signal on the F-Fund / AGG.  Allocations for the 4 funds, through the close of 4/16, are as follows:

• C-Fund / SPY:  29%
• F-Fund / AGG: 7%
• I-Fund / EFA:  18%
• S-Fund / VXF:  46%

Note that the C-Fund, F-Fund, and S-Funds are presently in cash (G-Fund), hence the only fund you should consider going long on Monday is the F-Fund / AGG.  Note that if you enter your order into TSP.GOV prior to about 10:00 a.m. it should post that evening, just like a mutual fund.

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There are two portfolios that you can choose from here.  One is a 3-ETF / Fund portfolio, which omits the F-Fund/AGG, and the other is a 4-ETF / Fund portfolio, which includes the F-Fund, AGG.  The G-Fund is the equivalent of cash and is not included here (we don't allocate to the G-fund explicitly -- when I indicate to move to cash, this means G-Fund).

3-Fund Portfolio Performance through 4/16/10

Here is the equity curve, since inception, of the 3-Fund Portfolio.  Right-mouse click on the image to open in a new window or tab, as you see fit:

Total gain is 26.88% gain since inception in 8/08.

Here are the buy/sell statistics with respect to the portfolio:

Note that the average win per trade is $3392.31 where as the average loss per trade is -$948.50.  This combindation is giving us a Mathmatical Expectation of 1.288, which is very good.  Also note that the Compounded Rate of Return is 15.74% since inception.

Here is the Situational Summary, which shows the total amount of Drawdown for the portfolio, since inception:

The figure above shows that we have experienced 9.05% drawdown in this portfolio.  With a Compounded Rate of Return of 15.74%, this yields a reward/risk (Calmar) ratio CR = 15.74 / 9.05 = 1.739.  We would like to move this above 2.0, with a target of 3.0, but 1.739 is very good.

Note that the buy-and-hold performance of the VVC since inception is a annualized rate of return (ARR) of -2.02%.

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4-Fund Portfolio Performance through 4/16/10


The 4-Fund portfolio splits funds into the AGG / F-Fund, which provides for greater diversification and hopefully lower risk.  Risk is measured as a function of the Calmar Ratio.

Here is the 4-ETF Equity Curve:

Total gain of the 4-ETF / Fund portfolio is 22.63%, measured from inception in 8/08.

Here are the performance statistics of the 4-ETF / Fund portfolio:

Note here that the average win per trade is $1956 and the average loss per trade is -$668.  These two values, coupled with the 55% win rate, yield a mathematical expecatation of 1.169, which is lower than the 3-ETF / Fund portfolio (as expected -- think of why!).  The Compounded Rate of Return (CRR) is 13.32%, measured from 8/08, which also is a few points shy of the 3-ETF/Fund portfolio.  Here's the situational summary which shows the total amount of Drawdown experienced in the portfolio since inception:

Here, we see that the maximum drawdown is 7.1%.  Combined with the CRR above, we have a reward/risk (Calmar) ratio = CR = 13.32/7.1 = 1.876, which is slightly higher than the 3-ETF/fund portfolio, which had a CR of 1.739.  This shows that diversification does lower risk, but it also does often lower the total return of the portfolio.

You have to choose which one is correct for you.  I personally invest my wife's TSP in the 3-ETF / Fund portfolio, chosing not to invest in the F-Fund / AGG.  Again, this decision is yours, not mine.

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Summary

If you follow in the 4-fund / ETF portfolio, then you should move 7% of your cash to the F-Fund / AGG before 10 a.m. Monday morning.   If you follow the 3-fund / ETF portfolio, you should do nothing at this point in time.

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Remember, you are responsible for your own trading decisions, not me.  Please do your own diligence.

Regards,

pgd