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Best Approach for Investing My Funds to Get Started

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Q:  When getting started, do you recommend buying all the positions currently held – or only when new ones are recommended?

 

A: There are two ways to approach getting started:

1) Set up a cash-funded account and only purchase your ETFs when they are newly recommended. Leave the balance in cash until you have used it all in the purchase of new ETF recommendations. This approach is appropriate if your objective is to hold the same positions as your strategy with individual position returns that match the model.

 

Or...

 

2) Buy the current ETFs held in each model on the coming Monday (even if your model continues to hold positions recommended a significant time ago). This approach puts your money to work immediately, but you must accept that your ETFs may soon be sold and replaced by new positions. However, even if already held for a while, those positions could be maintained even longer. Each model holds its positions for periods that differ from the other models, and even within a single model, a position may be held for a short time or a significantly longer time, depending on market conditions. See the table below for average hold times.

 

 

Pros and Cons

 

 

Either approach listed above is valid, and each has pros and cons. The most practical difference is in accounting.

 

Approach #1 offers you the ability to match the performance of each position to the recommendations in the model. However, your cash could be sitting in your account for a lengthy period*. Approach #2 gets your funds invested and working for you immediately, but your first purchases could have very different returns than the ETFs shown in your model. However, with the next set of investments, you should be able to match the performance demonstrated in your Premium Strategy subscription.

 

*Note: Subscribers to the Optimal Equity/Fixed Income (4 ETF) Strategy should keep in should keep in mind that the two-ETF Fixed Income component has an average hold time of 206 days, which – and with about 20 trading days in a month, that's an average of 10 months between trades for each of those two Fixed Income ETFs. See the table below for additional details on the average length of time ETFs are held for each model.

 

The approach you choose will probably depend on whether you place a higher value on 1) accurate position tracking or 2) an immediate return on your investment funds. We really can't recommend one approach being superior to the other – it depends on your individual preference and your priorities.

 

However, regardless of which approach you select, after several months (depending on the strategy), your investment funds should have approximately the same equity curve as the strategies you are following, and the real-time performance of each ETF you own should coincide with the returns of the positions in your model.

 

The following table can give you an idea of the historically average time that each model holds positions. Remember that if a business-cycle trend-change occurs, conditions can shift rapidly,  and these averages are made meaningless.

 

 

 

Strategies: Average Hold Time per Position

 

 

 

 

 

 

 

 

 

Attachments:
average-hold-time-per-position.png average-hold-time-per-position.png

 
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