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It’s All About Timing

Following up on a recent article I wrote warning of investment newsletters making bogus claims of past performance, I thought it is only fair to give credit where it is actually. While academia holds that it is not possible to consistently time the markets in the long run, there are a few strategies that seem to hold up. One newsletter that has been making predictions in real time following a very simple strategy since 1990 is written by a guy named Sy Harding.

The newsletter is a weekly one called the Street Smart Report, and it follows a very simple seasonal timing strategy. The basis of the strategy is that there is a favourable and unfavourable time of the year to be invested in the markets, and this is statistically verified using historical data. There is a very valid logic behind the seasonal tendencies of the markets, which I will not go into in much detail here. The important thing is that mainly it stems from things repeating every year such as fund managers making adjustments at year’s end to dress up their portfolios, people receiving annual bonuses in the early part of the new year, and institutional money managers taking their holidays during the summer months and thus exchange volumes dropping during this time.

There is an old adage that says “sell in May and go away”, and what Sy Harding has done is researched the numbers behind this and turned it into a trading system that tells exactly when to buy and when to sell the broad market as a whole. The strategy is thus very easy to implement using one exchange traded fund that buys the Dow Jones Industrial Average. You can implement it yourself online with a discount broker without needing to use a financial advisor, but remember it needs to be implemented with discipline to work and as always there is guarantee that the past performance of this strategy will be repeated in the future.

That said, the track record of Sy Harding is very impressive. In the past 15 years it has returned 271.5 percent compared to the 147.8 percent return that would have gotten from a buy and hold strategy on the DJIA. Not only that, the returns were a lot less volatile and of the last two crashes it missed the first one entirely making single digit positive returns during the dot com crash. During the 2008 crash the loss was only 3.6 percent. In fact since 1999 the strategy has only had two down years and both were less than 5 percent.

The great thing about this strategy is that if you already have any market based investment set up such as an offshore savings plan, you can still implement it within the structure. You may need to replace the DJIA with a similar fund such as a US-based or global based equity fund, but the overall seasonality that the strategy is based on should produce similar effects on your portfolio. At a price of $6 per week, I think this newsletter represents great value.

David Mayes MBA provides wealth management services to expatriates throughout Southeast Asia, focusing on UK Pension Transfers. He can be reached at david.m@faramond.com. Faramond UK is regulated by the FCA and provides advice on pensions and taxation.

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