I actually reviewed what I said yesterday, and I tested something over data. I thought of a new strategy, and I might follow it. So far it seems very promising. Let me know what you think.
I call it Switch On Switch, or SOS.
I start the year putting 100% of my starting capital in Canadian stocks, through an ETF. Could be another country or region, I go for Canada. I find a bond ETF that corresponds to the same region, in this case Canadian bonds. At the end of the month, I look at which of the two ETFs performed better. If stocks performed better, I keep my money there. If bonds performed better, I sell and keep my money out of the market. The month after I compare the bond VS the stock ETF again, and again the next month, until stocks beat bonds again. When they do so, I re-invest all my money in the stock ETF. Rinse & repeat.
I tested this with YTD data, and also with 2008-2009 data. In both cases I get a better return rate than the alternatives I usually have. I compared results for putting everything in the stock ETF and keeping it there during the whole duration, putting everything in bonds and keeping them there during the whole duration, or doing SOS.
Let's take this case for the January 1st 2008 to December 31st 2009, two years of data, and we are covering the crash of 2008 as a result:
Going all stocks only for the whole period would have resulted in a -14% ROI. Going all bond would have resulted in a 3.21% ROI. But going SOS would have resulted in a 31.89% ROI.
After transaction fees (a total of 11 transactions in two years, at $30 a transaction, or -2.5% in fees), this amounts to 28.09% return.
So $10,000 would have resulted in $2,809.46 of profits with SOS, VS a $1340.56 loss with all stock, or $261.37 profit with all bond.
I like it, it's simple, and the overall idea is to get out when stocks start to perform poorly, get in when it starts to pick up, using bonds as an guideline to establish an exit or entry point.
I'm tired of stock picking and the likes, so I might just do this with the money I don't put in my 401k or tax free savings account.