Thursday, October 14, 2010

Some R&D Progress Made

Below is a chart depicting some of the head way I have made over the last couple of months. The yellow line indicates application of the oracole formula (for now) vs. a buy and hold strategy.  This chart depicts the investment of $250 bi-monthly for 21 years in FCNTX.   Something that could maybe improve the result swould be to invest in the bond market (or other non equity position) during periods that one pulled out of equities.  This analysis assumed that there was a zero yield in the money market account.  Another important note is that this chart was only generated using strictly technical data analysis of the stock price.  There is no fundamental data analysis or external information used to generate the information in this chart.  Also there were no round trip trades employed to generate these results (see the last post).  The Oracole Strategy shown below (yellow line) did not out perform a tradition hold strategy (pink line) for most of the investment period.  This chart would also look very different if one simply looked at the growth of 10,000 over the same period (oracole would out perform after the first market drop).  My next goal is to employ some other technical measures (information external to the fund or equity) to try and improve performance further.

Total Cash Investment: $110,750
Hold Strategy Value: $337,848.13
Oracole Strategy: 383,036.02
Click on chart to expand.

One thing that I have learned during this process is that it is actually surprisingly difficult to beat a buy and hold strategy without employing some other asset class such as bonds, commodities, etc. I have determined some very interesting things in this process. My next step is to employ some additional analysis from external sources to the fund close price, but this is extremely time consuming.