Rolling Returns Illustrate What to Expect
Mostly USA & Worldwide ETFs Combined Switch Method
Rolling 52-weeks Annual Returns
7.9 years June 28, 2002--May 7, 2010
Hypothetical--Weekly
(See 'normal' chart here upon which
the one below is based.)
THE SETTING: HOW TO READ THE CHART
For example, the week ending May 5, 2006, the one-year switch-method return was +72.% while the one-year return on the S&P 500 was 10%. On April 27, 2007, the switch one-year return was -6% with the S&P +14.0%.
From there the Switch return curve exploded upward, in a series of pulses that peaked with a one-year return of +64% on November 14, 2008 while the SP500 scored -40%.
Both the recent timing and the unbroken vigor of the first explosive upward pulse from February 26 this year suggest the beginning of a new series of upward pulses culminating a couple of years from now at new high levels in the ranges of the two previous topping episodes, or higher.
THEY ALL LOOK LIKE THIS
. . . every fund, portfolio, stock, index, system, etf, bond, and anything else that trades for prices over time. Your does, mine do, the big financial companies', and every manager's. All have weekly rolling one-year returns since inception. They show what really goes on behind the scenes and what cause you to have periodic episodes of elation and distress.
The absolutely most important metric to judge the effectiveness of a fund or system versus all other choices is the average of all the rolling one-year returns over the longest period available. In this case, in the chart above, the two horizontal straight lines which express the average annual return since inception for each should be the soundest basis for judging relative value. The longer a fund is in business, the more valuable the lines are.
Most funds, methods, or systems, if they show charts, show you this kind of picture. It looks great. If they are no other dissuading factors, you buy on this.
But when you experience the ensuing reality, you may become disheartened and quit just when you shouldn't. You have seen, no doubt, the numerous commentaries on why most investors fail. They buy high and sell low. Knowing ahead of time what is going to happen, you may be able to withstand that temptation and avoid joining the crowd of 'most'.
It helps to keep the two images in mind. The courtship and the marriage--here.
Posted
5/19/2010 12:25 p.m. EDT
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