This is my first time using this network of shared information. I am not selling anything. I am reasonably sophisticated when comes to Technical Analysis and Fundamental Analysis and Computer modeling and the influences of big braking news.
But I know I don't have nearly enough information or established strategies to do better. If no-load mutual funds can go to cash just before a major sharp full market decline, and back after it hits bottom, with no costs for the trades, what is the vulnerability? Is there a big time delay between issuing the sell to cash order and the actual completion of the mutual fund sales transaction? Best regards. Bob Magnuson n333@comcast,net 978-683-5651
Comments
Many mutual funds do this but are generally not regarded highly by the masses because the typical metrics for evaluating mutual funds emphasize returns relative to index year over year than capital protection and its cost in terms of lower relative performance.
Are you asking about mutual funds themselves going all to cash or mutual fund investors going all to cash?
If the former, most mutual funds are too big to liquidate the entire position and to buy back without the resulting market price movement hurting even if they could time it right. In addition, just one mistake in timing can hurt the fund performance enough to kill it.
If the latter, it is much easier to go all in all out for typical individual assets and this is one of the advantage individual investors have over funds. However, doing so with the whole portfolio runs the risk of significant hits from false signals, so it would be better to have a core that is well diversified and a separate smaller one for momentum or trend trading that generates alpha if you get it right and doesn't hurt much if you get timing wrong sometimes.
PS: Not a good idea to leave names and contact info on public forums.
I appreciate when a managers accumulates cash from successful investments and then deploys that cash where they identify value. I also appreciate a manager's ability to hold non-correlated assets that serve to cushion periodic short term market sell offs.
If I understand you correctly, you might find some success in holding a broad base market fund like VTSMX and follow its 200 dma average. Use the 200 dma as a trigger to either be in or out of the market and hold cash or bonds when you are out of the market. Holding something like EDV (Long Duration Bonds) when you are out of the market might be an alternative to cash.
Here's what the last ten years would have looked like...red dots are the sell / buy triggers.
Chart traders often use a minimum buffer that it has to go through before pulling the trigger but that will significantly affect the actual returns and will still be subject to false signals. Some try to correlate with other indicators to validate the signal but there is nothing that works reliably. Otherwise, people would just be doing it automatically. It is only when you have an extended bear market that keeps you out for sufficient time to compensate for all false signal trades that you come out ahead. But it is never guaranteed.
If you do a free registration at barchart.com, you can get to the trading strategies page for each fund/etf where they keep track of automatic buys/sells based on each of a number of technical indicators and display the number of trades, average days between trades and the cumulative profit or loss. This varies from fund to fund and changes for each fund over time. Most of the time you see losses.
Nice chart bee!