Mutual-Fund Trading Algorithms Report
My mutual-fund trading algorithms in an 9.0-year trial beat the S&P 500 by 28.8%.
Total return from 2002 Jan 1 to 2010 Dec 31:
Berkshire Hathaway...................................................+62.9%
My mutual-fund trading algorithms................+40.0%
Long treasurys...........................................................+36.7%
One-year CDs.............................................................+30.3%
CPI.............................................................................+20.6%
US house prices, Case-Shiller 20-city.......................+20.5%
Money market...........................................................+16.2%
S&P 500 Index...........................................................+11.2%
Average fund manager..............................................+0.4%
Average fund investor................................................-9.5%
Financial advisors...................................................unknown
The algorithms are suitable for individual investors, financial advisors, software packagers, financial web sites, hedge funds, funds of funds, and financial software (Quicken).
The algorithms did not profit from leverage and required no trading on 37% of market days.
Notes: Berkshire Hathaway management had insider access; at inception shares were not available to small investors. The algorithms' return includes principal temporarily in money market. CD and treasury yields are from proprietary benchmarks that assume all instruments are held to maturity yet roll over every Friday. The long-treasury benchmark uses the yield on the 30-year bond before 2001 Oct., and on the 10-year note thereafter. The CPI underreports inflation (shadowstats.com). The Case-Shiller US 20-city composite has a two- or three-month delay. Fund managers underperform the market at a rate equal to fund expenses (John R. Talbott The 86 Biggest Lies on Wall Street 2009 p. 81); fund expenses in my survey are 1.20% per year. Mutual-fund investors underperform their funds by 1.1% per year (Kevin Laughlin via Jeff Sommer NYT 2011 Jan 2).
Hunter Greer
800 Harmony Lane
Ashland, OR 97520
fundsense at aol.com
