Kinabalu

Just 5 ETFs and You're Set? Buy-n-Hold Silliness Still Carries On

I find it interesting to compare this article with "A Discussion with John Bogle" published by Seeking Alpha on the same date. While Bogles comments are laden with research and facts this article has only opinion. If you really want to win the trading vs. buy & hold debate you have to explain why Mr. Bogles statistics are wrong. His comment: "while the SPDR had a five-year return of -1.9% a year—it’s been a difficult market—the average investor in SPDRs had a return of -8.2% a year" would be a good starting point.

Alternatives to Buy and Hold (Part II)

On Mar 06 01:27 PM Scott's Investments wrote:

< Kinabalu: Read Faber's article, using the GSCI
> as a 20% allocation was the benchmark used which helped contribute
> to the risk adjusted returns. However, you could certainly adjust
> the percentage as you see fit. The goal is to get diversification
> across as many non-correlated assets as possible and there is an
> abundance of evidence that direct commodity exposure helps lower
> volatility and increase risk adjusted returns.

Scott

I read the article. My only comment on the moving average system would be to note that it's a model. Models have a distressing habit of exhibiting entirely different risk-return matrices when they are actually implemented in investment portfolios with the resulting market impact..

My comment above was specifically directed at the asset allocation choices selected to display the model characteristics. Again, 20% is far too high for alternative investments, and including the GSCI index as a so-called diversified basket of commodities, as Faber does in his article, is misleading. That index is, in fact, 74% energy weighted, a fact which may have caused the non-correlation achieved during the period studied. The abundance of evidence you cite certainly exists for a relatively short historical period but I am not convinced it will be there in the future.

Alternatives to Buy and Hold (Part II)

A 20% alternative asset allocation (equal to the U.S. stocks allocation) is far too high, particularly with a concentrated base fund like GSCI. There isn't enough history, and related portfolio research, to support anything more than 5% in that area.