I am an advocate of both short-term and long-term trading in lieu of the traditional buy and hold asset allocation strategy. In asset allocation, a basket of securities is created with low correlations and then the basket is simply rebalanced every year or two to correct the changes in allocations. While this theory of investing, based on the efficient market hypothesis may have some theoretical basis (which is now questionable), regardless I am reluctant to accept it simply because of the anxiety created by bear markets.


As an alternative, I employ a simple long term moving average trading technique that buys and sells the following sectors based only on price:


Dba – agricultural commodity etf

Spy – S & P 500 ETF

Ilf- Latin America ETF

Gld – Gold ETF


Kol – Coal ETF

Slv – Silver ETF

Uso – Oil ETF

Ief – 7 – 10 Year treasury ETF

Tlt – 30 Year Treasury ETF

Tip – Inflation Protected ETF

Eem – Emerging Markets ETF

Uth – Utilities ETF


The system is simple. I allocate 10% of my long term trading portfolio to each ETF as it crosses 105% of  a long term (such as 130 day) moving average and simply sell at 95% of that average with a maximum of 10 open positions at one time. I find that I do at least as well as the Buy and Hold over the long run and avoid the losing market times. Note that my trading strategy also employs a maximum 10% stop loss on any one position.


Here is a comparison for the last 5 years. The Buy and Hold Strategy is based on 8% being allocated to each fund (4% for the 13th fund) and then rebalanced at the end of each year.  Note that this comparison excludes dividends but it also excludes the interest my trading strategy earns when I am out of the market.



Buy and Hold – 18.99%

Trading – 8.79%



Buy and Hold – 14.71%

Trading – 6.93%



Buy and Hold – 23.53%

Trading – 18.60%



Buy and Hold – (20.3%)

Trading – (1.04%)


2009 YTD

Buy and Hold – 18.91%

Trading – 20.22%


$100,000 equity after almost 5 years: Buy and Hold – $159,770; Trading – $172,581


This example shows a peculiar contradiction.  The Buy and Hold strategy looks pretty good.  It beats my trading most years.  But, the major exception is in 2008 and that is enough to tip the balance to the Trading strategy in terms of overall profitability. Of course, 2008 was a terrible year for Buy and Hold, I do admit that. But that’s exactly why I prefer trading. I make decent returns each year but avoid the major down years…I stay away from the heartburn associated with Buy and Hold investing.