Saturday, May 7, 2011

Returns for week ending 5/6/11

Returns for the past week:
"New" model portfolio: -6.03%
Actual managed account: -3.65%

Value of $10,000 invested in model portfolio at inception in 2003: $299,129

Note: "Actual" return varies from the model's return because I'm maintaining a higher cash position (approximately 50%) until the Thrust / Trend Model (TTM) gives us a fresh "BUY" signal.

As I mentioned last week, I'm doing this because of risk vs. reward. While the "new and improved" model has better returns than before, it also has higher weekly volatility, as we've seen just this past week. Because of this, it's now much more important to time the investment of fresh funds during times where we have a fresh BUY signal from the TTM.

As I noted last week, the market trend has become quite extended above its trend line since the current BUY signal was triggered in September, 2010. The risk of a "normal" market sell-off giving us a significant interim loss in our portfolio is much greater now than if the TTM had just thrown us a fresh BUY signal. In my judgement, this is not a good point in the intermediate term cycle to increase our risk exposure.

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