WHAT'S THIS SITE ABOUT?
This site is about demystifying the investment process while helping you develop the best (and safest) personal investment strategy, given your situation and personal preferences.
HOW DOES IT DO THAT?
In three steps: (1) By guiding you through everything one should consider before embarking on an DIY investment journey (free); (2) By outlining the differences between active and passive management strategies and how they relate your personal situation (free); and (3) by providing a global financial newsletter, Moosecalls, that tracks global stock markets, bonds, commodities, currencies, and that compares active/passive strategic performance so you know what’s working (not free, but very cheap).
WHO ARE YOU?
Decisionmoose.com and its content are provided by Quant$treet Corporation, a privately held, limited liability Maryland corporation (est. 1989) that is engaged solely in financial publishing. I am Bill Dirlam, the author of Moosecalls and the president of Quant$treet. I hold a Masters in Economics from Georgetown University and a Harvard MBA with forty years in banking and finance in both the public and private sectors. I began publishing this site over 25 years ago (1992).
Moosecalls is the premium content at decisionmoose.com. For a modest fee, readers can subscribe to an online newsletter covering global financial markets.
WHY CHARGE SO LITTLE FOR THE NEWSLETTER?
Let's just say I'm generous. Moosecalls' goal is investor education-- reaching as many people as possible in an affordable way. This website was free until scammers cloned it several years back and started selling the content at $200 per subscription. Protecting copyrighted material requires the ability to show economic loss in the event it is stolen, so I began charging a nominal fee for the newsletter. Moosecalls is for the do-it-yourself investor with small portfolios (under a million) who may not have access to professional money management or want high priced newsletters.
DO YOU SELL SUBSCRIBERS' NAMES AND E-MAIL ADDRESSES?
No, we do not sell, rent, or lease your personal information to any third party companies. Moreover, we secure your personal information from unauthorized access, use, or disclosure. Your personal information is maintained on computer servers in a controlled, secure environment, protected from unauthorized access, use, or disclosure. When personal information (such as a credit card number or personal data to join Moose Club) is transmitted to other websites, it is protected through the use of encryption, such as the Secure Socket Layer (SSL) protocol.
WHEN IS THE BEST TIME TO CHECK THE WEBSITE?
Moosecalls subscribers get a free “Update Email” each weekend with a link to the newsletter. The free parts of the site are updated weekly before the open-- prior to the first day of trading every week , usually Sunday PM.
ARE YOU BEING PAID TO MENTION FUNDS OR BROKERS?
No. No one associated with this site receives remuneration (hard or soft) from any fund provider or brokerage house for being mentioned here. Moreover, this site does not accept any advertising, insuring an independent viewpoint.
DO YOU INVEST IN THE SECURITIES YOU MENTION ON THE SITE?
Yes, I do invest in the funds mentioned here. Since they are globally-traded index and sector funds, however, it is virtually impossible for concerted action by our limited readership to move asset prices.
HOW DO I CHANGE MY PASSWORD, USERNAME and/or EMAIL ADDRESS?
The new site format means username and passwords will go away in 2021. You can change your email address by contacting firstname.lastname@example.org.
WHAT ARE MY BASIC STRATEGIC OPTIONS?
Strategies come in two basic flavors—active and passive. Combinations of the two (active/passive) are also possible—i.e., dynamic diversification (timed diversification), but they are way too much work without a supercomputer and not covered here. (Check with your broker.) Our two basic ETF investment strategies, then are passive diversification (diversified buy and hold), and active targeting (market timing). They are explained more fully on the Demoostify page.
HOW DO I DECIDE WHICH STRATEGY IS RIGHT FOR ME?
Knowing your ability and willingness to accept risk is the first step in deciding whether you should be a passive or an active investor. We provide a self-administered questionnaire to help. In addition, several interactive websites can help you delve deeper into your risk profile. Active strategies require more than a rudimentary understanding of the investment process. Passive strategies less so. Active strategies are appropriate for a medium to low risk tolerance, whereas passive buy-and-hold strategies are less risky day-to day, but can be much riskier at the extremes. (Holy smokes! Investment success gets down to paying attention!) Either way, both active and passive investors must acknowledge personal responsibility for the risk implicit in their actions, and be willing to stick to their chosen program over the medium-term (3-5 years).
WHY USE EXCHANGE TRADED FUNDS INSTEAD OF INDIVIDUAL SECURITIES?
Funds generate fewer trades with less risk. Individual equity prices are more volatile than stock or bond indices, making individual securities less predictable. Since the timing models on this site invest in only one asset at a time, a fund provides some of the diversification needed to reduce risk. (Given the prices of individual securities these days, it is pretty tough for a traditional investor to buy a thoroughly diversified portfolio of individual stocks and bonds for less than $300,000, so chances are, if your portfolio is under $300,000 and well diversified, there are some funds in it already.) On the downside, all funds, even ETFs, carry embedded administrative fees that individual securities don't have. In the end, however, after commissions, funds, especially ETFs, provide diversity cheaper and quicker.
WHAT FUNDS WORK BEST FOR TIMING?
Mutual funds often have limits that preclude frequent trading in timing strategies. For active targeting strategies, then, narrowly targeted ("compartmentalized") exchange traded funds (ETFs) that are not highly correlated with one another— at opposite ends of the spectrum-- work best. On the equity side, index ETFs and sector funds are most profitable. “Balanced” or “diversified” ETFs are not. On the income side, very short money (cash) and very long zeros are sufficient to cover the waterfront. Intermediate income funds actually reduce timing’s profitability.
WHAT FUNDS WORK BEST FOR BUY & HOLD DIVERSIFICATION?
For passive diversification strategies, diversified equity funds and intermediate income funds, reduce volatility and automatically rebalance for you, making life easier. If you want to be a minimalist, passive, globally-diversified portfolios are also available in one ETF (AOA, AOM). NOTE: Although this site deals exclusively with ETFs because of its penchant for active targeting, actively managed five-star mutual funds can be a profitable vehicle for diversified long-term buy-and-hold portfolios.
HOW MANY FUNDS SHOULD I HAVE IN MY PORTFOLIO?
That depends on you, on your strategy, your resources, and on what’s available. I am a minimalist. Actively targeted strategies like the models on this site invest in one ETF at a time, selected from a broader group of 8 to 10 ETFs. Holding one ETF means fewer trades, lower costs, and a more manageable task than holding several. But with timing you have to pick well. Following and picking from too few assets can reduce profitability, while picking from too many results in more trades. The optimal number of assets minimizes trade expense and maximizes profit, and is based on the amount of correlation that exists between the component funds. Meanwhile, a globally diversified buy-and-hold portfolio can get by with a minimum of four funds—cash, world stocks, world bonds, and commodities.
WHICH IS BETTER—MARKET TIMING OR BUY-AND-HOLD?
The debate goes on. Every mutual fund salesman you'll meet-- except maybe the Vanguard 500 guy-- would have you believe that his fund manager is a better stock picker than anyone else in the world, and although few like to mention it, good timing is implicit in good picking. On the other side, academia continues to go to great lengths to disprove timing and promote diversified buy-and-hold investing. The controversy, then, is between market participants with considerable practical experience, but a vested interest in timing's success, and academicians with little practical experience, but no particular vested interest. In the end, it is a personal decision.
WHICH COSTS MORE—MARKET TIMING OR BUY-AND-HOLD?
It depends on trading frequency. Brokerage expense does go up with active management, but buy-and-hold also incurs trading costs through periodic rebalancing. Both strategies can minimize expenses by using deep discount brokers and funds. To the extent that index funds generally have less turnover resulting in lower capital gains distributions, index ETFs do minimize taxes. Nevertheless, capital gains taxes will accrue from each transaction in taxable accounts, making any strategy more profitable in tax-deferred portfolios like IRA's, SEP's and so on. --
WHICH IS MORE WORK—MARKET TIMING OR BUY-AND-HOLD?
Managing your assets takes more time than ignoring them, and you should include your time when you're considering the costs of your investment program. Obviously, if you'd rather be doing something else, actively managing money probably isn't for you. INDEX MOOSE seeks to minimize the effort required by active management. It is an intermediate term model (6-9 months) that generates several long-only trades a year. It’s not a daily timing model, however, and you only have to check it once a week. Buy-and-hold is easier (until there is blood in the streets), but it too typically requires rebalancing, usually 1-4 times a year. See “Personal & Portfolio Issues” on the Demoostify page for more.
WHICH OUTPERFORMS—MARKET TIMING OR BUY-AND-HOLD?
It depends on the investment environment. INDEX MOOSE outperformed from 1992 to 2010, but past performance is no guarantee of future success, and it lagged from 2010 to 2016. (See below for the reasons.) Incorporating stops into INDEX MOOSE in late 2017, however, may have changed that. Comparative performance statistics over time are updated weekly on the Demoostify page, as well as on the Moosistory page. Performance trends are also monitored in the newsletter’s Moosecalls page.
WHICH IS RISKIER—MARKET TIMING OR BUY-AND-HOLD?
Depends. Using the standard deviation of weekly returns as a measure of risk (a common method), the time period one selects has a significant impact. As a general rule, the better timing is performing versus the S&P, the riskier the Moose may appear, using the standard deviation method of comparison. That's reasonable, because greater risk is necessary for greater return. Fact is, investors willingly overlook risk when their portfolios are getting fatter, so a more appropriate measure of overall risk considers return as well. We use the Sharpe ratio to measure risk-adjusted return.
WHAT IS DECISION MOOSE
Decision Moose is a financial model framework; a mechanism for timing the buying and selling of investment assets-- like stocks, bonds, and cash using momentum.
WHAT IS INDEX MOOSE?
Index Moose is one of several models within the decisionmoose framework. It uses stock, bond and gold index ETFs to help generate the Moosecalls newsletter and the free investment signal on this site. It is an attempt to time the global financial scene by actively comparing passive index funds.
WHAT IS US EQUITY STRATEGY MOOSE?
US Equity Strategy Moose is one of several models within the decisionmoose framework. It uses US equity smart-beta ETFs to generate a timing signal on the best strategy for US equity investors. It is an attempt to time the US equity financial scene by actively comparing passively managed ETFs based on an actively managed strategic index.
WHAT IS TSP MOOSE?
TSP Moose is one of several models within the decisionmoose framework. It uses TSP retirement fund data to generate a timing signal on the best timing strategy for Federal employees invested in the Thrift Retirement Program. It is an attempt to time the global financial scene by actively comparing passive TSP index funds with passive globally-diversified buy-and-hold "Lifetime" funds. It is for Federal employees only.
HOW DOES THE DECISIONMOOSE FRAMEWORK WORK?
The framework measures and compares the relative attractiveness of any number of assets based on recent price appreciation. Technical indicators then filter the one asset in the group with the highest probability of price appreciation. The details are proprietary, but the framework is more growth than value oriented in that price momentum and trend-following technical indicators play a central role, with Fed and overall market indicators. Unlike a diversified, buy-and-hold approach-- the strategy preferred by random-walk investors—the models invest their entire portfolio in one fund for as long as it is the most attractive among the group..
WHY INVEST 100% IN ONE ASSET AT A TIME?
Investing in one asset is logical for an active targeting strategy. Diversification is for those who don't think markets can be timed. Targeting is for those who think they can. For "prudent man" traditionalists, that may sound a little scary, but our research shows unequivocally that in a long-only model, a 100% investment in the most attractive asset yields significantly higher profits than diversifying a portion of the portfolio into each asset according to its relative attractiveness.
HOW SHOULD I TREAT WEEKLY SWITCH SIGNALS?
Treat switches as a guideline not as gospel. Since 1992, this website has been weekly. Since 2017 the models have been daily and have incorporated stops. That has improved model performance, but it makes realtime reader response a problem. Readers are likely to get switch signals 1-5 days after they occur. So if you want to be spoon-fed a portfolio strategy daily, you're unfortunately out of luck,
SHOULD I ACT IMMEDIATELY ON A SWITCH SIGNAL?
Not necessarily. None of the models are particularly effective as a short-term indicator. Waiting for an "up day" to switch out and a "down day" to buy in can improve performance... or not. The author uses short-term trading rules and a commercial charting and technical analysis program (TC-2000) to assist in the buy/sell decision. The fact is, a perfect switch is rarely possible. Short term, you are likely to be dissatisfied with what you got for the one you sold and what you paid for the one you bought. Moreover, delaying the switch could evolve into total inaction-- ignoring the signal altogether. Not a good idea. Even so, some delay is probably better than putting in a blind "switch" order with your broker over the weekend. Acting prior to a close provides better information than acting prior to an open. For more information on this topic, see "The Art of the Switch".
SHOULD I SWITCH INTO AN ASSET WHEN THE SIGNAL IS "HOLD"?
There are two types of signal at the Moose: HOLD and SWITCH. They mean (more or less) what they sound like they mean. Holding onto the ETF you’re supposed to switch out of for more than a week or two after a "switch" signal is not recommended. Similarly, switching into an ETF in the middle of its 'hold" signal is not recommended if the price has risen—and particularly if it is enough of a price increase to make the hold overbought. (The model uses Wilder’s 14-day RSI to determine overbought and oversold levels.)
SHOULD I EXPECT RETURNS SIMILAR TO THOSE ON THIS SITE?
Please don't. That way, you won't be disappointed if your effort falls short, and you can be pleasantly surprised if your effort does better. The strategic returns on this site are real time, but theoretical. There is no real account out there backing up the numbers. Moreover, to simplify the calculations, several shortcuts have been employed. Calculations do not include potential margin, taxes, transaction costs, or dividends earned. In addition, model switches are treated differently from reality. Apart from all that, I also make occasional errors. So I not only appreciate, but I rely on having a few thousand free editors checking my math, my spelling, my grammar, and even my methodology. I welcome the critique.
WHAT OTHER FACTORS MAY HAVE AN IMPACT ON RETURNS?
Theoretical returns are one thing, but do-it-yourself investing means the level of success you actually achieve will depend on you-- how well you keep to it, the type of account you have, your tax situation (state and federal), where you trade, how aggressive you are, and your short-term trading skills when it comes to making profitable switches.) If you turn out to be a nincompoop, that is on you.
WHAT ARE INDEX MOOSE’S STOP TRIGGERS?
Since October 2017, the model has used the Donchian 4-week system to set stop-losses and buy-stops. It is not the only method, but it is widely used, and more easily understood than others requiring more difficult calculations (e.g., average true range or standard deviation). An asset’s stop-loss target is generally below its 20-day intra-day low. Its buy-stop strike price is generally above its 20-period intra-day high. Stop levels can change daily, which is problematic for a weekly newsletter, but readers can get instant updates at stockcharts.com by adding “Price Channels” to “overlays” below the chart and clicking “update”. (It defaults to 20 periods or four weeks.) Check Investopedia for more info on Donchian channels.
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