Frequently Asked Questions
... about the Service
What does it cost?
Three strategies are priced separately at $14.95 per month. For those readers interested in more than one, there are package plans to choose from. The MAX Pak ropes everything in - including the stock-picking model Five Stocks - and is priced at $24.95/month, a considerable savings over purchasing the plans separately. See the complete breakdown of pricing on the Pricing Page.
What do I get?
Each subscriber receives a monthly email newsletter detailing the trade signals for that particular strategy. Newsletters will typically arrive prior to the opening bell on the first trading day of the month, sometimes earlier (i.e. the evening prior). For reference, all of the strategies execute their trades at the close of that first trading day each month.
Subscribers also gain access to the Members Page, offering up strategy details, an FAQ specific to that model, long-term and YTD charts, and a detailed trade history including a running monthly performance of the strategy.
Subscribers also gain access to the Members Page, offering up strategy details, an FAQ specific to that model, long-term and YTD charts, and a detailed trade history including a running monthly performance of the strategy.
How much money can I make?
If you're asking how much you can make trading stocks or ETFs in general, the answer is "no telling." If you're asking about our strategies specifically, the answer is "no telling." And I mean that sincerely. If you were hoping for an answer like, "a boatload," I could say that. But then I'd have to qualify that by adding you could also lose that boat.
What I'm offering is a window into strategies that have delivered strong past performances both in my own portfolios and in backtesting. But according to the first rule of investing, past performance is no guarantee of future results. I've fine-tuned the models and backtested until my eyes are crossed, but that's no guarantee going forward.
Before putting your hard-earned money to work in the stock market, you need to 1) be comfortable with the methodology behind any plan or strategy you look to employ, and 2) be fully aware of the risks involved in trading. I don't mean to frighten anyone, I just feel the need to speak truth to the topic. If it's any consolation, I have my own funds at risk in these very strategies.
If you're new to investing or to mechanical trading, I always advise caution. For example, employ a strategy in only a portion of your available investment portfolio. See how it performs over a period of time. You can always increase that proportion once you're comfortable with the mechanics and can see that it's meeting your expectations.
What I'm offering is a window into strategies that have delivered strong past performances both in my own portfolios and in backtesting. But according to the first rule of investing, past performance is no guarantee of future results. I've fine-tuned the models and backtested until my eyes are crossed, but that's no guarantee going forward.
Before putting your hard-earned money to work in the stock market, you need to 1) be comfortable with the methodology behind any plan or strategy you look to employ, and 2) be fully aware of the risks involved in trading. I don't mean to frighten anyone, I just feel the need to speak truth to the topic. If it's any consolation, I have my own funds at risk in these very strategies.
If you're new to investing or to mechanical trading, I always advise caution. For example, employ a strategy in only a portion of your available investment portfolio. See how it performs over a period of time. You can always increase that proportion once you're comfortable with the mechanics and can see that it's meeting your expectations.
Which strategy is the best?
That depends. Speaking generally of investment plans and strategies, it depends on an investor's comfort level with the assets in a particular strategy, tolerance for volatility, and time horizon. My highest producing ETF strategy (The White Knuckle) is also the most volatile. Meaning that the road to those high returns is frequently a white-knuckle roller coaster ride. Conversely, the strategy with the lowest volatility (smoothing out the coaster ride) also produces the lowest returns -- although it still comes within striking distance of the S&P 500 over time.
Again, much of this is through backtesting which, as we learned above, is no guarantee of future results. It also bears mentioning that not every year is a stellar year for every strategy. So if an investor's time horizon is relatively short - 2 or 3 years - that investor might be well advised to stick with a strategy that has shown more consistent green on the screen than an investor who has ten years or more to work with.
So, which strategy is the best? For every investor it will be different. For me, I've spread my funds over all the strategies detailed within these pages.
Again, much of this is through backtesting which, as we learned above, is no guarantee of future results. It also bears mentioning that not every year is a stellar year for every strategy. So if an investor's time horizon is relatively short - 2 or 3 years - that investor might be well advised to stick with a strategy that has shown more consistent green on the screen than an investor who has ten years or more to work with.
So, which strategy is the best? For every investor it will be different. For me, I've spread my funds over all the strategies detailed within these pages.
Which strategy will be the most diversified with highest long-term returns?
Hard to pick just one strategy to fit your parameters. I developed each strategy to fill a specific need. A side benefit: because each strategy uses a slightly different mechanism to identify market risks, and because each employs slightly different funds representing often different market sectors (although there is some overlap), there is beneficial diversification at work when employing two or more strategies.
Personally, I have all of them at work in various proportions. Bond Bulls gives me access to bond markets that the others don't. Global Trader gives me access to international markets. American Muscle breaks down the U.S. market into sectors. The White Knuckle is designed to deliver the highest return over time - but it does so with high volatility and potentially large drawdowns, pretty much requiring it to be paired with one or more strategies that are inherently safer (like Bond Bulls).
All five subscription models hedge with Treasuries, and three of the four periodically employ currencies as part of their hedge.
You can read about the funds each strategy employs on their respective public pages. Subscribers can also see the returns that could have been generated over the past 12 to 15 years for different mixes of strategies by using the Returns Calculator (available in their account window).
In the end, the best answer to your question is probably a combination of two or more strategies. Which two (or more) is something each investor will have to decided for himself, as every investor will have a different tolerance for risk, and is in a different life situation.
[Tip: the MAX Pak gives you access to all the strategies at a significant discount. Link below]
Personally, I have all of them at work in various proportions. Bond Bulls gives me access to bond markets that the others don't. Global Trader gives me access to international markets. American Muscle breaks down the U.S. market into sectors. The White Knuckle is designed to deliver the highest return over time - but it does so with high volatility and potentially large drawdowns, pretty much requiring it to be paired with one or more strategies that are inherently safer (like Bond Bulls).
All five subscription models hedge with Treasuries, and three of the four periodically employ currencies as part of their hedge.
You can read about the funds each strategy employs on their respective public pages. Subscribers can also see the returns that could have been generated over the past 12 to 15 years for different mixes of strategies by using the Returns Calculator (available in their account window).
In the end, the best answer to your question is probably a combination of two or more strategies. Which two (or more) is something each investor will have to decided for himself, as every investor will have a different tolerance for risk, and is in a different life situation.
[Tip: the MAX Pak gives you access to all the strategies at a significant discount. Link below]
Am I investing my money directly with you?
No. I'm not a broker, a hedge fund, or a money manager. I provide the trade alerts for my strategies via regularly scheduled email newsletters. Should you wish to take those trade alerts and act upon them, you will need to have an established brokerage account, be familiar with the mechanics of trading, and place those trades yourself (or with the assistance of a licensed broker).
Perhaps now is a good time to remind readers that continued use of this website and associated media (i.e. newsletters and email alerts) requires acceptance of both the Terms of Use and Disclaimer statements, which can be found on links in the footer and the top menu of each page.
Perhaps now is a good time to remind readers that continued use of this website and associated media (i.e. newsletters and email alerts) requires acceptance of both the Terms of Use and Disclaimer statements, which can be found on links in the footer and the top menu of each page.
Do you offer a guarantee?
No and no.
No, in that my services bill month-to-month and there is no refund for payments made, nor is there any 'guarantee' that you will be happy or satisfied with the service. That said, you can cancel at any time and no further charges will be incurred. And while I don't offer refunds or satisfaction guarantees for the service, individual investors using the service for the first time receive the first 2 months free of charge on all subscription plans. I feel that provides sufficient time to judge the value of the service, and see if it would be an appropriate addition to your investment plans.
And no, in that I can't guarantee that you will make money from information gleaned from my services. Remember the first law of investing: past performance is no guarantee of future results. So I can't guarantee how much money -- if any -- you'll make with any information I provide. As every fund manager, financial counselor, broker and prospectus will tell you, "you invest at your own risk."
And speaking of "first laws," the first law of this website is acceptance of my Terms of Use and Disclaimer statement, both of which can be found through links at the page footer, or in the menu under "Company" at the top of the page.
No, in that my services bill month-to-month and there is no refund for payments made, nor is there any 'guarantee' that you will be happy or satisfied with the service. That said, you can cancel at any time and no further charges will be incurred. And while I don't offer refunds or satisfaction guarantees for the service, individual investors using the service for the first time receive the first 2 months free of charge on all subscription plans. I feel that provides sufficient time to judge the value of the service, and see if it would be an appropriate addition to your investment plans.
And no, in that I can't guarantee that you will make money from information gleaned from my services. Remember the first law of investing: past performance is no guarantee of future results. So I can't guarantee how much money -- if any -- you'll make with any information I provide. As every fund manager, financial counselor, broker and prospectus will tell you, "you invest at your own risk."
And speaking of "first laws," the first law of this website is acceptance of my Terms of Use and Disclaimer statement, both of which can be found through links at the page footer, or in the menu under "Company" at the top of the page.
I've read your book and follow The 12% Solution. How does that strategy stack up against these?
The 12% Solution excels in its simplicity, and remains unrivaled as the lowest risk equity fund rotation strategy of the bunch. That's due largely to its ever-present 40% bond allocation. The 12% Solution remains one of my core investment strategies.
Performance wise, it's been running slightly ahead of Bond Bulls over the past decade, but falls short of the other 4 strategies. Bond Bulls delivers the lowest risk metrics of all the strategies; The 12% Solution falls roughly in the middle of the pack. White Knuckle and Five Stocks have higher volatility and max drawdowns, but investors (over time) are compensated with superior returns.
As a lower-risk strategy that still delivers quite respectable returns, The 12% Solution is hard to beat. Yes, it would pair well with one of the riskier strategies (like Global Trader or The White Knuckle) for an improvement in overall returns. But it's also possible that it may very well satisfy all your requirements, as is. If so, the icing on the cake is that it's a do-it-yourself model. No subscription needed.
Performance wise, it's been running slightly ahead of Bond Bulls over the past decade, but falls short of the other 4 strategies. Bond Bulls delivers the lowest risk metrics of all the strategies; The 12% Solution falls roughly in the middle of the pack. White Knuckle and Five Stocks have higher volatility and max drawdowns, but investors (over time) are compensated with superior returns.
As a lower-risk strategy that still delivers quite respectable returns, The 12% Solution is hard to beat. Yes, it would pair well with one of the riskier strategies (like Global Trader or The White Knuckle) for an improvement in overall returns. But it's also possible that it may very well satisfy all your requirements, as is. If so, the icing on the cake is that it's a do-it-yourself model. No subscription needed.
Do your strategies ever change?
Short answer: yes.
Each of the subscription models will periodically undergo modifications. These can be changes to the models' assets (the funds that are traded) or the parameters that dictate the trades. An ETF may be delisted by its provider and need to be replaced. A blend of funds may no longer provide the hedge they used to. I may see an opportunity to adjust the parameters to improve returns or lessen the risk of the strategy.
No strategy should be carved in stone; it should be allowed to evolve to meet new and changing market demands. The overarching goals remain: keeping performance levels as high as possible given the risk metrics.
Should a change in mechanical rules or composition of assets become necessary, backtested performance results may also need to be updated. I will announce any such changes on the Members Pages, and note the particulars. In addition, a log of performance data -- pre-modification -- is always available for reference.
Each of the subscription models will periodically undergo modifications. These can be changes to the models' assets (the funds that are traded) or the parameters that dictate the trades. An ETF may be delisted by its provider and need to be replaced. A blend of funds may no longer provide the hedge they used to. I may see an opportunity to adjust the parameters to improve returns or lessen the risk of the strategy.
No strategy should be carved in stone; it should be allowed to evolve to meet new and changing market demands. The overarching goals remain: keeping performance levels as high as possible given the risk metrics.
Should a change in mechanical rules or composition of assets become necessary, backtested performance results may also need to be updated. I will announce any such changes on the Members Pages, and note the particulars. In addition, a log of performance data -- pre-modification -- is always available for reference.
How long have the strategies been in place?
Four of the five subscription models went live to the public on Jan 1, 2019. I had been trading them for a year or two prior, and continue to trade each of the strategies in various proportions within my accounts. Five Stocks went live April 2, 2023.
By the way, most of the models have undergone one or two tweaks (modifications) since going live -- and will undergo tweaks in the future as conditions dictate (see question above).
By the way, most of the models have undergone one or two tweaks (modifications) since going live -- and will undergo tweaks in the future as conditions dictate (see question above).
Are the results you post for your strategies based on actual live trading, or is it backtested data?
All the performance results you see on the website are technically backtested results, even though live trading in most of the strategies has been ongoing since Jan 1, 2019. By backtested results, it means I use each strategy's algorithm to display the returns, the volatility, the drawdowns, and the like - whether looking back one day, one month, or ten years.
Why post backtested results vs. live trading results? Because backtested results represent each strategy in its purest form.
For example, the algorithm behind a model always executes its rebalancing trades at the close on the first trading day of the month. And it's those closing prices it uses in calculating returns, drawdowns, etc. On the other hand, live trading is subject to a number of variables depending on who is doing the trading. While it's certainly possible to emulate the model and rebalance at the close on the first trading day of the month, most folks (myself included) find it easier to place their trades prior to the close - sometimes hours earlier and at their convenience. As the market is always moving, if I make a trade at noon and the strategy makes the same trade at close, that four-hour price swing will either be to my advantage, or detriment, by the end of the month when the strategy posts results. So, I might beat the strategy or lag the strategy for the month - although such differences are usually slight over time.
Another example: humans have been know to panic (shocking!). If the market is going haywire on rebalancing day, a human investor might delay a trade for a day or two to see how things shake out. Or that human might decide to allocate a portion of the portfolio to cash (not a bad idea sometimes). Or that human might decide he knows better than the model which ETFs will fare better in the upcoming month, and switch to something else. Not so the algo. The algorithm is a cold-hearted machine that follows the plan, executes trades at precise times, and never succumbs to emotion when the going gets tough.
So, in the interest of accuracy and consistency, I use the algorithms when posting results. In my experience, and to sum things up, any differences between live and backtested data can be attributed to 1) the slight difference in execution times for the trades, and 2) whether or not one sticks with a particular strategy through thick and thin, as opposed to acting on emotion and trading in and out of the strategy.
Why post backtested results vs. live trading results? Because backtested results represent each strategy in its purest form.
For example, the algorithm behind a model always executes its rebalancing trades at the close on the first trading day of the month. And it's those closing prices it uses in calculating returns, drawdowns, etc. On the other hand, live trading is subject to a number of variables depending on who is doing the trading. While it's certainly possible to emulate the model and rebalance at the close on the first trading day of the month, most folks (myself included) find it easier to place their trades prior to the close - sometimes hours earlier and at their convenience. As the market is always moving, if I make a trade at noon and the strategy makes the same trade at close, that four-hour price swing will either be to my advantage, or detriment, by the end of the month when the strategy posts results. So, I might beat the strategy or lag the strategy for the month - although such differences are usually slight over time.
Another example: humans have been know to panic (shocking!). If the market is going haywire on rebalancing day, a human investor might delay a trade for a day or two to see how things shake out. Or that human might decide to allocate a portion of the portfolio to cash (not a bad idea sometimes). Or that human might decide he knows better than the model which ETFs will fare better in the upcoming month, and switch to something else. Not so the algo. The algorithm is a cold-hearted machine that follows the plan, executes trades at precise times, and never succumbs to emotion when the going gets tough.
So, in the interest of accuracy and consistency, I use the algorithms when posting results. In my experience, and to sum things up, any differences between live and backtested data can be attributed to 1) the slight difference in execution times for the trades, and 2) whether or not one sticks with a particular strategy through thick and thin, as opposed to acting on emotion and trading in and out of the strategy.
What do I have to do to get started?
Look over the strategies and find one (or more) you'd like to follow. A good place to start is the Compare Strategies page. Find something you like, then jump over to the Pricing Page.
Once signed up, sit back and begin receiving your monthly newsletters with buy/sell signals. And anytime you want to dig a little deeper, you can access the Members Pages for the strategies you've selected.
Once signed up, sit back and begin receiving your monthly newsletters with buy/sell signals. And anytime you want to dig a little deeper, you can access the Members Pages for the strategies you've selected.
... about Trading
Each month, are we liquidating all of the previous ETFs and buying the new picks?
For any given strategy, assuming the ETF picks are different for the upcoming month, yes - you will liquidate the old picks and buy the new with the proceeds. If the picks are the same from month to month, you can let things ride. The exception would be if the percentages have gotten dramatically out of whack.
For example, Global Trader calls for a 40/30/30 percentage allocation of funds (broad-market, sector, or flight-to-safety). Should the picks remain the same going into a second or third month, yet a spike in one of those funds has resulted in a 40/20/40 allocation, a rebalancing trade might be called for in order to bring the funds back into 40/30/30 alignment.
For example, Global Trader calls for a 40/30/30 percentage allocation of funds (broad-market, sector, or flight-to-safety). Should the picks remain the same going into a second or third month, yet a spike in one of those funds has resulted in a 40/20/40 allocation, a rebalancing trade might be called for in order to bring the funds back into 40/30/30 alignment.
Do you rebalance even if the ETF picks remain the same?
Usually, no. You can just let things ride (no trades).
In the 'perfect world' of the algorithms, the models assume any necessary rebalancing trades each month to maintain their target allocations, even if the ETF picks remain the same from one month to the next. In real life, such rebalancing trades (when the picks remain the same) are usually small and can be ignored.
An exception might be if the same asset is held for months on end, and the allocation becomes obviously out of whack. [See the example in the question above.]
But generally speaking, when the strategy indicates the same picks as the previous month, I let things ride.
In the 'perfect world' of the algorithms, the models assume any necessary rebalancing trades each month to maintain their target allocations, even if the ETF picks remain the same from one month to the next. In real life, such rebalancing trades (when the picks remain the same) are usually small and can be ignored.
An exception might be if the same asset is held for months on end, and the allocation becomes obviously out of whack. [See the example in the question above.]
But generally speaking, when the strategy indicates the same picks as the previous month, I let things ride.
Have you done any backtests when combining two or more strategies into a single portfolio?
I happen to be a big fan of employing multiple strategies in an account. I do that myself. While I can't advise on the proportion of each model in a portfolio - because everybody is in a different place in life and has a different risk appetite - the idea is sound.
Subscribers who have access to Excel can utilize two tools that can help with allocating multiple strategies: in your "My Account" popup window, check out the Returns Calculator to experiment with different combinations of strategies, and then the Allocation Calculator to see how those combinations translate into specific funds and the actual dollar amounts to purchase.
Subscribers who have access to Excel can utilize two tools that can help with allocating multiple strategies: in your "My Account" popup window, check out the Returns Calculator to experiment with different combinations of strategies, and then the Allocation Calculator to see how those combinations translate into specific funds and the actual dollar amounts to purchase.
How do I trade multiple strategies when some utilize the same ETFs? Do I just double down on those funds?
Short answer - yes.
When using multiple strategies in a portfolio, no doubt there will often be some overlap of the same funds. While that can seem a little unnerving at first, like you're getting yourself too concentrated in one or two funds, there is a positive case to be made, too. Because each strategy uses a slightly different mechanism to identify market risks, when the same fund comes up in the same month between two different strategies, that's a pretty strong signal. So for example when Bond Bulls is signaling 80% TLT and Global Trader is signaling 30% or 100% TLT, the equity market is in trouble - and you want to be in Treasuries.
It's true that some models will overlap practically by design. For example, American Muscle holds QQQ each month, while The White Knuckle holds the 3X cousin of QQQ (TQQQ). But the percentage allocation of each ETF will vary according to models' parameters and the interplay with other model components. And those percentage allocations - over time - have tended to point in the right direction.
When using multiple strategies in a portfolio, no doubt there will often be some overlap of the same funds. While that can seem a little unnerving at first, like you're getting yourself too concentrated in one or two funds, there is a positive case to be made, too. Because each strategy uses a slightly different mechanism to identify market risks, when the same fund comes up in the same month between two different strategies, that's a pretty strong signal. So for example when Bond Bulls is signaling 80% TLT and Global Trader is signaling 30% or 100% TLT, the equity market is in trouble - and you want to be in Treasuries.
It's true that some models will overlap practically by design. For example, American Muscle holds QQQ each month, while The White Knuckle holds the 3X cousin of QQQ (TQQQ). But the percentage allocation of each ETF will vary according to models' parameters and the interplay with other model components. And those percentage allocations - over time - have tended to point in the right direction.
When do you, personally, do your rebalancing trades?
All the strategies execute their rebalancing trades at the close on the first trading day of the month. In real life, that's a bit hard to emulate.
I make it easy on myself. On the first trading day of the month, I'll skip the first hour of market open (crazy time), and aim for mid to late afternoon. But to be honest, I might pull the trigger on a trade at any time of the day.
Keep in mind, this is a long game. The actual time of day the trade is placed, or even if the trade is a day early or a day late, should not make a significant difference over the long term. Fractionally, yes. But that could be to the upside as well as the downside. The strategies are tools that give us a general sense of where the market is headed at a given point in time. But 1) they're not perfect, and 2) there's wiggle room.
I make it easy on myself. On the first trading day of the month, I'll skip the first hour of market open (crazy time), and aim for mid to late afternoon. But to be honest, I might pull the trigger on a trade at any time of the day.
Keep in mind, this is a long game. The actual time of day the trade is placed, or even if the trade is a day early or a day late, should not make a significant difference over the long term. Fractionally, yes. But that could be to the upside as well as the downside. The strategies are tools that give us a general sense of where the market is headed at a given point in time. But 1) they're not perfect, and 2) there's wiggle room.
Is there any way to avoid the 3-day rule in an IRA account?
IRA accounts are, by definition, cash accounts. And in theory, cash accounts require funds from the sale of an asset to settle (3 business days) before placing new trades using that money.
That said, I know for a fact that, in their retirement accounts, both TD Ameritrade and Charles Schwab will let you sell one security and turn around and purchase another on the same day with those "unsettled" funds. They do put a restriction on that purchase - you must hold that security until the settlement date is reached for the funds used (3 days). And they don't allow just any security to be purchased this way. For example, over-the-counter stocks are out. But index ETFs and bonds funds are OK.
Here's how a TD Ameritrade representative put it when I asked about the policy in June of 2020:
"For an IRA account, you are allowed to have margin privileges. However, these privileges come with restrictions. In an IRA account margin will only allow you to bypass settlement periods, you will not be able to borrow off it like in a taxable account. I hope this information helps."
I can't speak for other brokers. It appears to be that they make their own policy as to whether or not they want to extend this 'courtesy' to their investors. My advice would be contact your broker and see if they allow it.
That said, I know for a fact that, in their retirement accounts, both TD Ameritrade and Charles Schwab will let you sell one security and turn around and purchase another on the same day with those "unsettled" funds. They do put a restriction on that purchase - you must hold that security until the settlement date is reached for the funds used (3 days). And they don't allow just any security to be purchased this way. For example, over-the-counter stocks are out. But index ETFs and bonds funds are OK.
Here's how a TD Ameritrade representative put it when I asked about the policy in June of 2020:
"For an IRA account, you are allowed to have margin privileges. However, these privileges come with restrictions. In an IRA account margin will only allow you to bypass settlement periods, you will not be able to borrow off it like in a taxable account. I hope this information helps."
I can't speak for other brokers. It appears to be that they make their own policy as to whether or not they want to extend this 'courtesy' to their investors. My advice would be contact your broker and see if they allow it.
How are you selling and buying funds on the same day? I have to wait 3 days.
If you're trading in an IRA, see the Q&A above. If you're in a traditional brokerage account, then what you've got is a cash account. In theory, cash accounts require funds from the sale of an asset to settle (3 business days) before placing new trades using that money. It's like that with TD Ameritrade, for example.
But Charles Schwab, on the other hand, will let you sell one security and turn around and purchase another with those "unsettled" funds. They do put a restriction on that purchase - you must hold that security until the settlement date is reached for the funds used (3 days). And they don't allow just any security to be purchased this way. For example, over-the-counter stocks are out. But index ETFs and bonds funds are OK.
BTW, both Schwab and TD Ameritrade allow this kind of trade in their retirement accounts (ie. IRA, ROTH, SEP), which are otherwise cash accounts.
With our strategies, we want to sell the funds we don't want and buy the funds we do -- on the same day, with the same money. If you're up against a broker that requires you to wait for settled funds, the fix is to turn that cash account into a margin account. You fill out a form with your broker, and that's it. This is what I've done. Because I don't utilize margin money for investing, it doesn't cost me any extra. And it gives me the freedom to rebalance the strategies on the same day.
But Charles Schwab, on the other hand, will let you sell one security and turn around and purchase another with those "unsettled" funds. They do put a restriction on that purchase - you must hold that security until the settlement date is reached for the funds used (3 days). And they don't allow just any security to be purchased this way. For example, over-the-counter stocks are out. But index ETFs and bonds funds are OK.
BTW, both Schwab and TD Ameritrade allow this kind of trade in their retirement accounts (ie. IRA, ROTH, SEP), which are otherwise cash accounts.
With our strategies, we want to sell the funds we don't want and buy the funds we do -- on the same day, with the same money. If you're up against a broker that requires you to wait for settled funds, the fix is to turn that cash account into a margin account. You fill out a form with your broker, and that's it. This is what I've done. Because I don't utilize margin money for investing, it doesn't cost me any extra. And it gives me the freedom to rebalance the strategies on the same day.
Would you advise using stop losses on the ETFs in your strategies?
First, let me say that if I were running just one strategy in a portfolio, I would likely be using stops. They're a legitimate risk-management tool, especially for investors new to a strategy and trying to get a feel for the risk.
That said, I've got mixed feelings about stop losses. While the concept sounds good in principle, in practice it's more complicated.
If you've used them before in your trading, you've likely experienced the frustrations: you get stopped out only to see the stock (or ETF) reverse course in a day or two and close the month higher than your sell point. Or, the stop would get taken out at the market open, and you'd sit there in cash as the market slowly recovered.
The other thing about stops - you've got to figure out when to get back in the market if you get stopped out. Do you wait until the next rebalancing, or do you try to pick a bottom? If the latter, you've become an active trader as opposed to letting the strategies do the heavy lifting for you.
That said, as you know, many traders are believers in stop losses as a way to manage risk. A lot of that belief likely comes from picking the right stop price or percentage. On that, I don't have a good answer for you (and of course, that's pretty much the key). You might find it will take a bit of trial and error to find the sweet spot - the percentage that doesn't stop you out too often, but still protects.
Right now, I have no stops. My current risk management strategy is based on not allocating too large a share of the more "risky" models to my overall portfolio. So, for example, I've got The White Knuckle occupying maybe 10% of my overall portfolio, Five Stocks another 15%. American Muscle is at 25% or so. I'm comfortable with those percentages; they're counterbalanced by the more diverse Global Trader and the more conservative Bond Bulls which round out the portfolio. Taken together, I believe I can ride out anything those models throw at me.
To circle back around, I'm neutral on stops. I've used them, I may use them again. Of the strategies in the lineup, I would be more inclined to implement them on Five Stocks and The White Knuckle.
But every investor has to make that call himself.
That said, I've got mixed feelings about stop losses. While the concept sounds good in principle, in practice it's more complicated.
If you've used them before in your trading, you've likely experienced the frustrations: you get stopped out only to see the stock (or ETF) reverse course in a day or two and close the month higher than your sell point. Or, the stop would get taken out at the market open, and you'd sit there in cash as the market slowly recovered.
The other thing about stops - you've got to figure out when to get back in the market if you get stopped out. Do you wait until the next rebalancing, or do you try to pick a bottom? If the latter, you've become an active trader as opposed to letting the strategies do the heavy lifting for you.
That said, as you know, many traders are believers in stop losses as a way to manage risk. A lot of that belief likely comes from picking the right stop price or percentage. On that, I don't have a good answer for you (and of course, that's pretty much the key). You might find it will take a bit of trial and error to find the sweet spot - the percentage that doesn't stop you out too often, but still protects.
Right now, I have no stops. My current risk management strategy is based on not allocating too large a share of the more "risky" models to my overall portfolio. So, for example, I've got The White Knuckle occupying maybe 10% of my overall portfolio, Five Stocks another 15%. American Muscle is at 25% or so. I'm comfortable with those percentages; they're counterbalanced by the more diverse Global Trader and the more conservative Bond Bulls which round out the portfolio. Taken together, I believe I can ride out anything those models throw at me.
To circle back around, I'm neutral on stops. I've used them, I may use them again. Of the strategies in the lineup, I would be more inclined to implement them on Five Stocks and The White Knuckle.
But every investor has to make that call himself.
I'm nervous about committing to any new strategy, especially in this market. Any advice?
I'm cautious, myself. With these strategies, I give new subscribers two full months free of charge - enough time to gauge how the models handle current market conditions without risking any money. As some point, when ready to commit capital, you could "leg in" to one or more strategies; that is, start by buying half as much as you want, or a third or even a fourth. See how it goes for a while. You can always increase that proportion as you grow comfortable with the workings of the models.
The bottom line: you need to be able to sleep at night. Invest only up to your comfort level. That goes for any stock market asset or trading strategy or investment plan.
The bottom line: you need to be able to sleep at night. Invest only up to your comfort level. That goes for any stock market asset or trading strategy or investment plan.
... about Brokers
Can you recommend a broker?
I've been happy with T.D. Ameritrade and Charles Schwab. I especially like Schwab's trading platform called StreetSmart Edge. But others swear by T.D. Ameritrade's Think-or-Swim. [Both firms have fast-to-learn web platforms for simpler trades, research and more.] In years past I've had good experiences with ETrade and Fidelity. I've tried Interactive Brokers, but I found their trading platform unusually complicated.
Here's something to keep in mind. With cash accounts, many brokers will not allow a new trade until funds settle from a sale. It's like that with TD Ameritrade, for example. But Charles Schwab, on the other hand, will let you sell one security and turn around and purchase another with those "unsettled" funds. They do put a restriction on that purchase - you must hold that security until the settlement date is reached for the funds used (3 days). And they don't allow just any security to be purchased this way. For example, over-the-counter stocks are out. But index ETFs and bonds funds are OK.
BTW, both Schwab and TD Ameritrade allow this kind of trade in their retirement accounts (ie. IRA, ROTH, SEP), which are otherwise cash accounts.
The reason I bring this up? It impacts our strategies. In a perfect world, we want to sell the funds we don't want and buy the funds we do -- on the same day, with the same money.
If you're up against a broker that requires you to wait for settled funds, the fix is to turn that cash account into a margin account. This is what I've done. And because I don't utilize margin money for investing, it doesn't cost me any more.
Finally, if you're just starting out, I'd go to the websites of the top 3 or 4, look around and check their prices (most are heading towards commission-free trades, see below), pull up any tutorials they might have to offer, and just get a general feel about them. You might even call them up and see how customer service reps/brokers respond to a question or two (like the question about cash accounts and retirement accounts - and any courtesy offered for same-day trades with unsettled funds). Since prices are starting to level out, a lot of it comes down to the vibe you get from the company and how intuitive you find the trading platform. And both of those are subjective.
Here's something to keep in mind. With cash accounts, many brokers will not allow a new trade until funds settle from a sale. It's like that with TD Ameritrade, for example. But Charles Schwab, on the other hand, will let you sell one security and turn around and purchase another with those "unsettled" funds. They do put a restriction on that purchase - you must hold that security until the settlement date is reached for the funds used (3 days). And they don't allow just any security to be purchased this way. For example, over-the-counter stocks are out. But index ETFs and bonds funds are OK.
BTW, both Schwab and TD Ameritrade allow this kind of trade in their retirement accounts (ie. IRA, ROTH, SEP), which are otherwise cash accounts.
The reason I bring this up? It impacts our strategies. In a perfect world, we want to sell the funds we don't want and buy the funds we do -- on the same day, with the same money.
If you're up against a broker that requires you to wait for settled funds, the fix is to turn that cash account into a margin account. This is what I've done. And because I don't utilize margin money for investing, it doesn't cost me any more.
Finally, if you're just starting out, I'd go to the websites of the top 3 or 4, look around and check their prices (most are heading towards commission-free trades, see below), pull up any tutorials they might have to offer, and just get a general feel about them. You might even call them up and see how customer service reps/brokers respond to a question or two (like the question about cash accounts and retirement accounts - and any courtesy offered for same-day trades with unsettled funds). Since prices are starting to level out, a lot of it comes down to the vibe you get from the company and how intuitive you find the trading platform. And both of those are subjective.
What's this I hear about commission-free trades?
Sparked by competition from the likes of financial startup Robinhood ("Investing with Robinhood is commission free, now and forever." states their website), certain major online brokers began offering commission-free trades in September and October of 2019.
Interactive Brokers was the first big player to reduce commission rates to zero with their IBKR Lite platform. Charles Schwab announced commission-free trades on all stocks and ETFs effective October 7, 2019. Not to be outdone, TD Ameritrade, ETrade, and Fidelity quickly followed suit (and now Vanguard, with some restrictions). Most analysts believe this is a trend that will continue until all major brokers are onboard with zero commissions for online trades, with fees remaining on broker-assisted trades (i.e, on trades placed by phone), options, foreign transactions, and certain accounts.
For frequent traders that's obviously a game changer. But even for investors in our monthly rotation strategies, it means more money in our pockets at the end of the year. Employing a single strategy might have required up to four trades per month. Employing all four subscription strategies, in various proportions, could mean up to 12 trades each month. With Schwab's previous pricing structure, that would have generated $59.40 per month in commissions. With TD Ameritrade's previous pricing, $83.40 per month.
That's a cool $1000 annually that will now stay in our pockets.
Interactive Brokers was the first big player to reduce commission rates to zero with their IBKR Lite platform. Charles Schwab announced commission-free trades on all stocks and ETFs effective October 7, 2019. Not to be outdone, TD Ameritrade, ETrade, and Fidelity quickly followed suit (and now Vanguard, with some restrictions). Most analysts believe this is a trend that will continue until all major brokers are onboard with zero commissions for online trades, with fees remaining on broker-assisted trades (i.e, on trades placed by phone), options, foreign transactions, and certain accounts.
For frequent traders that's obviously a game changer. But even for investors in our monthly rotation strategies, it means more money in our pockets at the end of the year. Employing a single strategy might have required up to four trades per month. Employing all four subscription strategies, in various proportions, could mean up to 12 trades each month. With Schwab's previous pricing structure, that would have generated $59.40 per month in commissions. With TD Ameritrade's previous pricing, $83.40 per month.
That's a cool $1000 annually that will now stay in our pockets.
What do you know about commission-free ETF trades at Vanguard?
I know enough to point you to the right page. Click Commission-Free ETFs at Vanguard. As of this date (January 5, 2020), Vanguard appears to be offering commission-free online trades for stocks and ETFs, although there is some fine print that apparently excludes 401(k) participants using their Self-Directed Brokerage Option. Investors should verify the details directly with Vanguard.
But here's a monkey wrench - and it's a big one. On January 22, 2019, Vanguard Brokerage stopped accepting purchases in leveraged and inverse mutual funds, ETFs, and ETNs (exchange-traded notes). Click Leveraged and Inverse Products at Vanguard for more information.
That restriction impacts trading in three of the four models on these pages - Bond Bulls, Global Trader and The White Knuckle. Each of those have one or more leveraged ETFs in its lineup. You can get by with Bond Bulls and Global Trader by skipping those ETFs when they are selected by the model, with varying results (more detailed information on that option on the Members Pages of each strategy). But The White Knuckle, because if its dependence on these leveraged funds, would be effectively excluded.
American Muscle and The 12% Solution do not have leveraged funds in their lineups, so these models would not be impacted.
So while commission-free is certainly nice, keep in mind this restriction with Vanguard Brokerage.
But here's a monkey wrench - and it's a big one. On January 22, 2019, Vanguard Brokerage stopped accepting purchases in leveraged and inverse mutual funds, ETFs, and ETNs (exchange-traded notes). Click Leveraged and Inverse Products at Vanguard for more information.
That restriction impacts trading in three of the four models on these pages - Bond Bulls, Global Trader and The White Knuckle. Each of those have one or more leveraged ETFs in its lineup. You can get by with Bond Bulls and Global Trader by skipping those ETFs when they are selected by the model, with varying results (more detailed information on that option on the Members Pages of each strategy). But The White Knuckle, because if its dependence on these leveraged funds, would be effectively excluded.
American Muscle and The 12% Solution do not have leveraged funds in their lineups, so these models would not be impacted.
So while commission-free is certainly nice, keep in mind this restriction with Vanguard Brokerage.
Is there a broker you could recommend for investors living in Europe? Belgium in particular?
The EU has not made it easy to buy U.S. domiciled ETFs or similar products. But the marketplace is changing. At this point in time, here are some contenders:
Interactive Brokers. Access to global markets. Zero commission on US listed stocks and ETFs. A bit of a complex platform and a learning curve to master, but they've won numerous awards.
Passfolio. Free US stock and ETF trading. Good mobile platform.
TradeStation. Zero commission on stocks and ETFs. Good mobile platform.
Firstrade. Free US stock and ETF trading. Good mobile platform.
There are others, but this will get you started. Finally, it’s always a good idea to talk with someone from the firm to verify that they can handle the job you require.
Best of luck.
Interactive Brokers. Access to global markets. Zero commission on US listed stocks and ETFs. A bit of a complex platform and a learning curve to master, but they've won numerous awards.
Passfolio. Free US stock and ETF trading. Good mobile platform.
TradeStation. Zero commission on stocks and ETFs. Good mobile platform.
Firstrade. Free US stock and ETF trading. Good mobile platform.
There are others, but this will get you started. Finally, it’s always a good idea to talk with someone from the firm to verify that they can handle the job you require.
Best of luck.
I’m having difficulty finding European ETFs that track the same index /bonds that you use. Can you help?
Without a doubt, the EU is not making it easy to buy U.S. domiciled ETFs or similar products. While I've only done limited research, and without knowing your particular situation, I would point you to the following web page as a start:
What Are The Best ETFs for European Investors?
The article identifies two choices if you want to buy ETFs as a European investor.
-- You can buy the European ETFs that iShares, Vanguard, and other providers offer that most closely align with the U.S. based funds you're targeting. Most of the main asset classes are available as ETFs for European investors.
-- You can open an account with a US-based broker who can offer you US-based ETFs.
Regarding the first point. The article singles out the two most significant providers of relevant ETFs for European investors:
-- iShares
-- Vanguard
Regarding the second point. European laws - and U.S. regulations - change frequently, so I don't know if these are viable options at this time, but here are four brokers to consider:
Interactive Brokers. Access to global markets. Zero commission on US listed stocks and ETFs. A bit of a complex platform and a learning curve to master, but they've won numerous awards.
Passfolio. Free US stock and ETF trading. Good mobile platform.
TradeStation. Zero commission on stocks and ETFs. Good mobile platform.
Firstrade. Free US stock and ETF trading. Good mobile platform.
There are others, but this will get you started. Finally, it’s always a good idea to talk with someone from the firm to verify that they can handle the job you require.
The article goes on to discuss a great deal of relevant info including currency risk and hedging, and is worth a complete read.
What Are The Best ETFs for European Investors?
The article identifies two choices if you want to buy ETFs as a European investor.
-- You can buy the European ETFs that iShares, Vanguard, and other providers offer that most closely align with the U.S. based funds you're targeting. Most of the main asset classes are available as ETFs for European investors.
-- You can open an account with a US-based broker who can offer you US-based ETFs.
Regarding the first point. The article singles out the two most significant providers of relevant ETFs for European investors:
-- iShares
-- Vanguard
Regarding the second point. European laws - and U.S. regulations - change frequently, so I don't know if these are viable options at this time, but here are four brokers to consider:
Interactive Brokers. Access to global markets. Zero commission on US listed stocks and ETFs. A bit of a complex platform and a learning curve to master, but they've won numerous awards.
Passfolio. Free US stock and ETF trading. Good mobile platform.
TradeStation. Zero commission on stocks and ETFs. Good mobile platform.
Firstrade. Free US stock and ETF trading. Good mobile platform.
There are others, but this will get you started. Finally, it’s always a good idea to talk with someone from the firm to verify that they can handle the job you require.
The article goes on to discuss a great deal of relevant info including currency risk and hedging, and is worth a complete read.
