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Adaptive Asset Allocation Strategies for Core Investments. Gabe Varga, CMT Website: www.FidelitySignal.com E-mail: [email protected] INDIANAPOLIS METRO AREA - TRADERS & INVESTORS May 4, 2013. Adaptive Asset Allocation Strategies for Core Investments.

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Adaptive asset allocation strategies for core investments

Adaptive Asset Allocation Strategies for Core Investments

Gabe Varga, CMT

Website: www.FidelitySignal.com

E-mail: [email protected]

INDIANAPOLIS METRO AREA - TRADERS & INVESTORS

May 4, 2013


Adaptive asset allocation strategies for core investments1

Adaptive Asset Allocation Strategies for Core Investments

Change over time, as the economy and the markets change


Adaptive asset allocation strategies for core investments2

AdaptiveAsset Allocation Strategies for Core Investments

Vanguard Target Retirement 2030 - VTHRX

Vanguard Target Retirement 2015 - VTXVX

http://quotes.morningstar.com/fund/vtxvx/f?t=vtxvx


Adaptive asset allocation strategies for core investments3

Adaptive Asset Allocation Strategies for Core Investments

Definition of strategy: A method or plan chosen to bring about a desired future, such as achievement of a goal or solution to a problem.

www.businessdictionary.com/definition/strategy.html

Important or essential in relation to a plan of action

www.thefreedictionary.com/strategic

Definition of tactics: Means by which a strategy is carried out (e.g. stock selection)

www.businessdictionary.com/definition/tactics.html


Adaptive asset allocation strategies for core investments4

Adaptive Asset Allocation Strategies for Core Investments

Definition of Core Holding in the Financial Dictionary - An investment expected to be part of a portfolio over a long period of time.

Examples: retirement account with mutual fund holdings, blue chip stock portfolio

Trading accounts and core investment holdings are usually managed differently







Prospect theory describes the influence of fear greed and hope on human decision making
Prospect theory not changed over the centuries describes the influence of fear, greed, and hope on human decision-making




What did we learn

Psychology of booms/busts have not changed averages) for entry/exit

Trend following using technical analysis tools (e.g. 100 day moving average) is a great way to invest

What did we learn?


What did we learn1

Psychology of booms/busts have not changed averages) for entry/exit

Trend following using technical analysis tools (e.g. 100 day moving average) is a great way to invest

Cannot assume that the market will be higher in the future

What did we learn?


What did we learn2

Psychology of booms/busts have not changed averages) for entry/exit

Trend following using technical analysis tools (e.g. 100 day moving average) is a great way to invest

Cannot assume that the market will be higher in the future

Markets have changed

electronic trading became dominant and financial markets seem to be more volatile now

the buy-and-hold strategy that worked so well in the 1980s and 1990s has resulted in extremely high risk and small real return for investors since 2000

What did we learn?


Investment approach for core holdings

Psychology of booms/busts have not changed averages) for entry/exit

Use technical analysis tools

Cannot assume that the market will be higher in the future

Markets have changed

Avoid the buy-and-hold

  • Multi-year bull markets represent the best opportunities for investment gains

  • Avoid being invested during a downtrend

  • Identify “intermediate-term” uptrends and reallocate core investments to adopt to and take advantage of uptrends

Investment approach for core holdings

Intermediate term uptrend started in December 2012



Long term study of returns by ed easterling
Long-term study of returns by Ed market environment? Easterling


Fidelity real estate income frifx yield 4 38

3 years market environment?

Fidelity Real Estate Income, FRIFX yield 4.38%


Fidelity real estate income frifx yield 4 381

Raising cash reserves as a simple, but effective adaptive strategy

10 years

Fidelity Real Estate Income, FRIFX yield 4.38%


FidelitySignal.com strategyis an investment newsletter that makes it easier to start and manage your portfolio of Fidelity mutual funds.





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