* With markets dropping a pretty significant 4.5% in the few days since we opened our last Iron Condor, we’ll have to close that one today and open a new one on Monday so please don’t miss that below.
So I have a specific strategy question today from our friend George:
“I was wondering how long is the VTS Tactical Balanced strategy positioned in MDY stocks on average? (also GLD and IEF %). Any info would be appreciated.”
I’ve had a few of these this week and I’m pretty sure they are motivated by the higher frequency of trades recently in that strategy. So let me answer this question in two parts:
1) The VTS Tactical Balanced Strategy averages 3.3 changes in positions per month. Since every time we change positions it requires closing one trade and opening another because we only ever hold one asset class at any one time, technically that means the strategy averages 6.6 trade transactions per month.
But practically it means that in an average month we have 3.3 days where action is required. A typical month has about 20 trading days, so it’s fairly inactive. It’s our “core” strategy.
I’m not a day trader and I don’t feel that high trade frequency adds any value to the strategy. I choose our positions very carefully by weighing a number of indicators, and when markets are calm this means we can remain in positions for extended periods of time. If the markets are moving around a lot and having a difficult time forming any trend like right now, then we may have to change positions more frequently.
So far in the last 30 days we’ve changed position 5 times, so it’s a little higher than the long-term average of 3.3.
2) Here are the long-term allocations for each of the 3 possible positions (MDY stocks, IEF Bonds, GLD Gold) in the VTS Tactical Balanced Strategy:
There’s no doubt the stock market factors highly in the strategy averaging nearly 55% of long-term allocations. But as we all know the stock market can see fast and occasionally very deep declines and it’s the goal of the strategy to be out of as many of those days as possible.
This past February was a good example of that. We had a flat, reasonably uneventful month despite what the stock market is doing. Now hopefully markets can calm down a little bit and find some direction, but regardless of what’s coming next we’ll try to be ready with safety Bonds and Gold positions if necessary.
Current VTS Total Portfolio Solution Allocations
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