Exist make easy 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,e.g. win long term.
Interestingly, often the simplest systems that are more likely to get it .
In this article I will talk about one of them, well – known, but no less profitable.
The system is to follow the general index, or ETF that replicates the general index, passing a liquidity falls off. And when the bag when the bag falls believe that? Very simple: with an average cross.
Moving averages are used in technical analysis. They are the average of the last N days; when N is small, for example 10 days, the average is similar to the price curve. If the average is large, 100 days, the average is much flatter . In the picture you look the Ibex35 with averages of 10 days and 100 days (red and green). A very simple method therefore is to sell when the price index cut down the average 100, and buy when you cut upward. Such systems are called momentum or trend. They work well when the stock market has strong trends, but perform poorly when the bag this side and there are multiple crossings with the means that generate false signals.
IBEX and Media
The simple system that want to comment using an average long-term average of 12 months. It sold when the closing price on the last day of the month cruising down the middle, and bought conversely, at the crossroads upward. We see the system on the ETF that replicates the index American SP500, the SPY.
You can see that in 2010 and in 2011 there are some months that would cause some losses, but overall, this system enables save heavy losses and follow the upward trends.
Moreover, the system remains liquid for long periods. What could we do with that cash?
We should invest in risk – free assets. The wisest and are probably simple bank deposits.
I will assume therefore that when we are in liquidity, we invested the money in a deposit at 2.5% APR. They probably can get better rates, especially 10 or 20 years ago there were better deposits, but we will be Prosecution.
The SPY has a history that reaches 1993. For earlier results, directly use the American index.
We see an annual return of between 8 and 9%.
But the interesting thing is that this figure is maintained using data a decade, two decades, 3 to 4 decades and decades. 40 years!. Keep in mind that the stock market in 1973 had nothing to do with the current.
The maximum losing streak increases as the term is longer; Obviously, a greater number of years, most likely to overcome the worst losing streak.
Simple IBEXAnd in other markets ?. Ensure results of 10 years in Europe, using as a theoretical asset indices Spain (IBEX 35), France (CAC) and Germany (DAX). The results are somewhat worse, which is logical since European stock markets have done worse than American last decade. But the system is still profitable.
Worst Draw down are somewhat high, but for a long term investor a losing streak of 20 to 30% at some point in decades does not mean much.
In short, this is a simple, able to make money in the most varied circumstances over decades and different countries system.
A truly robust system.
Seeing that the system is stable, it occurs to me how would this system in comparison with the Spanish pension system?
I discuss in the next article. I think there will be surprises.