Exist Make simple money in countless ways to invest our savings and make them grow slowly or quickly. Most of them are not able to withstand the test of cotton, that is, to win in long terms.
Curiously, it is usually the simplest systems that are most likely to get it.
In this article I will talk about one of them, well known, but not less profitable.
The system consists of following the general index, or an ETF that replicates the general index, passing us to liquidity when the stock market falls. And when do we consider that the stock market falls? Very simple: with a cross of stockings.
Moving averages are widely used in technical analysis. They are the average of the last N days; When N is small, say 10 days, the mean is similar to the price curve. If the average is large, 100 days, the average is much flatter. The image shows the Ibex35 with its stockings of 10 days and 100 days (red and green). A very simple method is therefore to sell the index when the price cuts the average down 100, and buy it when you cut it up. These types of systems are called momentum, or trend.
IBEX and media100
The simple system that I want to comment uses a very long term mean, the average of 12 months. It is sold when the closing price of the last day of the month crosses the downside with the average, and is bought in reverse, at the upside. We see the ETF system that replicates the US index SP500, the SPY.
It can be seen that in 2010 and in 2011 there are some months that would cause some losses, but in general, this system allows us to save ourselves from the heavy losses and follow upward trends.
On the other hand, the system remains in liquidity for long periods. What could we do with that liquidity?
It should be invested in risk-free assets. The most prudent and simple are probably the bank deposits.
I will assume therefore that when we are in liquidity, we invest the money in a deposit at 2.5% APR. Probably you can get better rates, especially 10 or 20 years ago that there were better deposits, but we will be prosecuted.
What results do you get? The following table shows them:
The SPY has a history that goes back to 1993. For previous results, we use the American index directly.
We see that there is an annual return of between 8 and 9%.
But the interesting thing is that this figure is kept using data of a decade, 2 decades, 3 decades and up to 4 decades. 40 years! It should be noted that the stock exchange of 1973 had nothing to do with the current one.
And although a return of 8% is not very large, it surpasses most of the investment funds, as I commented in the previous post.
The maximum streak of losses increases as the term is longer; It is logical, to a greater number of years, more likely to overcome the worst streak of losses.
Simple IBEXAnd in other markets? We will check your results for 10 years in Europe, using the index of Spain (Ibex35), France (CAC) and Germany (DAX) as the theoretical asset. The results are somewhat worse, which is logical since the European stock markets have done worse than the American last decade. But the system remains profitable.
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The worst streaks of losses are somewhat high, but for a long-term investor a streak of losses of 20 to 30% at some point in several decades does not mean too much.
In short, this is a simple system, able to make money in the most varied circumstances, over decades and over different countries.
A truly robust system.
Seeing that the system is stable, It occurs to me, how would this system compare with the Spanish pension system?